Which of the following statements is CORRECT? A)If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0. B)If you have a series of cash flows, and CF₀ is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost. C)To solve for I, one must identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, essentially, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise. D)If you solve for I and get a negative number, then you must have made a mistake. E)If CF₀ is positive and all the other CFs are negative, then you cannot solve for I.

Question

Quizplus · Accepted Answer

The correct method to solve for the internal rate of return (IRR) is to find the rate (I) that equates the present value of positive cash flows to the absolute value of the present value of negative cash flows. This is typically done using trial-and-error or computational tools.

Which of the Following Statements Is CORRECT