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Basic Question 26 of 29

Which statement best describes multiple IRR projects?

A. Projects that have more than one cost of capital are difficult to evaluate, since we don't know which cost of capital to use to evaluate the project.
B. Projects that have more than one payback period are difficult to evaluate, since we don't know which period to use to evaluate the project.
C. Projects that have more than one internal rate of return are difficult to evaluate, since we don't know which rate to use to evaluate the project.
D. Projects that have more than one NPV are difficult to evaluate, since we don't know which rate to use.
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User Contributed Comments 3

User Comment
sarath Multiple IRRs occur when we have non-normal cash flows...and it is difficult to choose one particular IRR.
gouthamks What if both all IRRs obtained are greater than the cost of capital ?
Bududeen it is not possible for both IRRs to be greater than the cost of capital...since if they do, the project would have been rejected anyway because of -ve NPV...think about bell shaped NPV profile.
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
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Learning Outcome Statements

describe the capital allocation process, calculate net present value (NPV), internal rate of return (IRR), and return on invested capital (ROIC), and contrast their use in capital allocation

CFA® 2025 Level I Curriculum, Volume 2, Module 5.