Question

When starting a business, it is necessary to invest an initial investment equivalent to C (>0), and in the next two years, there will be an investment plan for investing in Y-2 cash flow. In order to uniquely exist between 0 and 1 (or 0% to 100%) of the internal rate of return (IRR), please satisfy (C, Y1, and Y2) conditions that need to be satisfied.

Answer 1

IRR is the Internal Rate of Return i.e. a discount rate at which difference between the inital investment in the project and present value of the subsequent cash flows is zero. In other words Total present value of the cash flows at IRR is equal to the initial investment value.
For IRR to be in between 0 to 1, it needs to be ensured that:
1) There must be cash inflows during the llife of project. If there is any cash outflow then IRR will not give you correct answers.
2)There is assumption that all future cash flows are reinvested at IRR, which needs to be satisfied but in actual it is most unlikely.
There is one more condition that needs to be satisfied i.e If there is two mutually exclusive projects and there is conflict between the NPV and IRR , it is better to select NPV.