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In projects with unconventional cash flows (negative and positive cash flows throughout the life of the...

In projects with unconventional cash flows (negative and positive cash flows throughout the life of the project), the phenomenon of multiple rates of return can occur. In these cases, the internal rate of return (IRR) is the most appropriate method of project evaluation.

a. True
b. False

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Answer #1

False

Internal rate of return is the average return that the project gives over the period of its lifetime. In Projects with unconventional cash flows there are scenarios when there is more than one internal rate of return, which can cause problem as it is difficult to choose which IRR rate should be compared with the cost of capital, as One IRR rate could say to select the project while other could say to reject the project, so this would not be an ideal scenario for project evaluation.

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