A project will have only one internal rate of return if:
A)the net present value is positive
B)the net present value is negative
C)the cash flows decline over the life of the project
D)there is a one-sign change in the cash flows

Question

Quizplus · Accepted Answer

A project will have only one internal rate of return if there is a one-sign change in the cash flows. If cash flows change signs (i.e., negative to positive or vice versa) more than once, it will result in multiple internal rates of return, making it difficult to determine which rate to use. The net present value being positive or negative does not determine the uniqueness of the internal rate of return. Similarly, the cash flows declining over the life of the project does not have any impact on the uniqueness of the internal rate of return.

A Project Will Have Only One Internal Rate of Return