For a project with conventional cash flows, multiple internal rates of return can occur when the cash-flow pattern contains:
Correct answer: D. More than one change in the signs of cash flows
- A. Only one change from outflow to inflow
- B. A positive net present value at every discount rate
- C. Equal inflows in every operating year
- D. More than one change in the signs of cash flows
Explanation
Multiple IRRs may arise when cash flows change sign more than once, such as outflow, inflow, and later outflow. With only one sign change, a conventional project normally has one meaningful IRR.
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