What is the decision rule in the case of sign changes that produce multiple IRRs for a project?
A) Select the lowest IRR to be conservative
B) Select the highest IRR to maximize the benefits
C) Any or all of the IRRs are justified to use
D) Calculate the modified internal rate of return.

Question

Quizplus · Accepted Answer

When sign changes result in multiple IRRs, the best choice is to calculate the modified internal rate of return (MIRR), which eliminates the issue of multiple IRRs by assuming that all cash flows are reinvested at a predetermined rate. Using MIRR allows for a more accurate comparison of the profitability of different projects.

What Is the Decision Rule in the Case of Sign