- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 5. Capital Investments and Capital Allocation
- Subject 2. Capital Allocation
CFA Practice Question
Multiple IRRs are likely to appear when the ______
A. cost of capital is less than the modified IRR, or the cash flows of a project are large in magnitude.
B. cost of capital equals the interest rate.
C. cash flows change direction several times during the life of a project.
Explanation: Multiple IRRs appear when cash flows are non-normal. Non-normal cash flows occur when negative net cash flows occur during some year after a project has been undertaken.
User Contributed Comments 1
| User | Comment |
|---|---|
| bekki | multiple IRRs can occur for non conventional projects |