Which of the following statements best describes normal cash flows?
A) Projects with "normal" cash flows can have only one real IRR.
B) Projects with "normal" cash flows can have two or more real IRRs.
C) The "multiple IRR problem" can arise if a project's cash flows are "normal."
D) Projects with "non-normal" cash flows are almost never encountered in the real world.

Question

Quizplus · Accepted Answer

"Normal" cash flows refer to cash flows where there is only one sign change, from negative to positive or positive to negative. Projects with "normal" cash flows will have only one real IRR. The "multiple IRR problem" arises only in projects with non-normal cash flows, where there are multiple sign changes.

Which of the Following Statements Best Describes Normal Cash Flows