Sir,
As explained by you in your tutor forums..i understood there every time there is a change in sign,there is a potential IRR..
(Q) A company is considering a project that has an inital outflow followed by a several years of inflows with cash outflow in final year
How many IRRs could there be for the project?
(Ans) Zero, one or two
I understood the reason of one or two IRRs
But how can a project have Zero ie no IRR at all?
Kindly explain
Thanks
Ask the Tutor ACCA FM
IRR
4y ago#1Although as I illustrate in my lecture, the graph of the NPV against the interest rate will initially fall but will then increase, it does not necessarily have to ever go below zero.
Consider this. If there was an initial investment of 100, followed by a receipt in 1 years time of 500, following my an outflow in 2 years time of 100, then you will find that the NPV is positive whatever rate of interest you apply.
Perfect example..Thanks sir
4y ago#3You are welcome :-)
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