CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

A project may have multiple IRRs because ______
A. it may have cash outflows at the end of the project in addition to the investment outlay at the beginning.
B. its cash flows are received far into the future or it has negative NPV.
C. it has a small investment at the beginning and a very large cash flow at the end.
Explanation: A project has multiple IRRs due to its cash flows switching directions multiple times.

User Contributed Comments 3

User Comment
Max27 This answer needs to be reviewed. Choice "C" is a textbook answer to why multiple IRR'S may exist; negative NPV
Bibhu No. The answer is correct. Apart from one cash flow at the beginning, it has more cash out flows during the life of the project, which could lead to NPV =0.
JonClark Key words: "MAY HAVE" cash outflows at the end
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