Suppose that a project has a cash flow pattern (-$2,000, $25,000, -$25000) Its IRR is given by:
A) 12.20%
B) 9.61% or 1040.39%
C) 25.25% or 250.52%
D) 4100.11%

Question

Quizplus · Accepted Answer

The IRR (Internal Rate of Return) is calculated by finding the rate(s) that make the net present value (NPV) of cash flows equal to zero. In this case, the cash flow pattern indicates there could be multiple IRRs due to the change in sign of the cash flows (from negative to positive to negative again), which is a classic scenario for multiple IRRs. The correct answer involves calculating or estimating the IRRs that satisfy the NPV equation for this specific cash flow pattern.

Suppose That a Project Has a Cash Flow Pattern (-$2,000