How many possible IRRs could you find for the following set of cash flows?
$$\begin{array} { c c c c c c }
\text { Time } & 0 & 1 & 2 & 3 & 4 \
\text { Cash Flow } & - \$ 15,000 & \$ 6,000 & \$ 10,000 & \$ 12,000 & \$ 1,000
\end{array}$$
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?
$$\begin{array} { c c c c c c } 
\text { Time } & 0 & 1 & 2 & 3 & 4 \
\text { Cash Flow } & - \$ 15,000 & \$ 6,000 & \$ 10,000 & \$ 12,000 & \$ 1,000
\end{array}$$
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 project is determined by the number of times the cash flow changes sign. In this case, there is only one sign change (from negative at time 0 to positive at time 1), indicating there is only one possible IRR.

How Many Possible IRRs Could You Find for the Following