Which of the following outcomes can result when IRR is used in appraising projects with unconventional cash flows?
A) Inaccurate ranking positions
B) Mutual exclusivity
C) High apparent opportunity costs
D) Multiple solutions

Question

Quizplus · Accepted Answer

When appraising projects with unconventional cash flows (i.e., cash flow signs change more than once), the IRR method can result in multiple solutions. This is because the mathematical nature of the IRR calculation can yield more than one rate that satisfies the equation where the net present value equals zero.

Which of the Following Outcomes Can Result When IRR Is