How many possible IRRs could you find for the following set of cash flows?
$$\begin{array} { l c c c c c c }
\text { Time } & 0 & 1 & 2 & 3 & 4 \
\text { Cash Flow } & - \$ 10,000 & \$ 5,350 & \$ 4,180 & \$ 1,520 & \$ 2,000
\end{array}$$
A) 1
B) 2
C) 3
D) Unable to determine unless we have the cost of capital.

Question

How many possible IRRs could you find for the following set of cash flows?
$$\begin{array} { l c c c c c c } 
\text { Time } & 0 & 1 & 2 & 3 & 4 \
\text { Cash Flow } & - \$ 10,000 & \$ 5,350 & \$ 4,180 & \$ 1,520 & \$ 2,000
\end{array}$$
A) 1
B) 2
C) 3
D) Unable to determine unless we have the cost of capital.

Quizplus · Accepted Answer

The number of possible IRRs for a set of cash flows is determined by the number of times the cash flow changes sign. In this case, there is only one sign change (from negative to positive), indicating there can only be one IRR.

How Many Possible IRRs Could You Find for the Following