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 there are multiple sign changes in the cash flows, there can be multiple internal rates of return or no internal rate of return at all. The net present value being positive or negative does not determine the number of internal rates of return. Similarly, the cash flows declining over the life of the project does not affect the calculation of the internal rate of return.

A Project Will Have Only One Internal Rate of Return