标题: How do you solve this IRR question? [打印本页] 作者: ikoreaii 时间: 2011-7-11 15:13 标题: How do you solve this IRR question?
Two projects have the following cash flows:
Time 0 1 2
Project A 100 -275 300
Project B -100 300 -200
The internal rate of return (IRR) problem most likely to emerge with each project's cash flow is:
a. Both projects have a multiple IRR problem.
b. Project A has a multiple IRR problem, Project B has no IRR.
c. Project B has a multiple IRR problem, Project A has no IRR.
How do you identify which project has a multiple IRR or no IRR?
I'll post answer shortly. Thanks!作者: Siddimaula 时间: 2011-7-11 15:13
With every change in the number being positive or negative, that's how many IRRs you will have.
So, project A goes from 100 (positive) to -275 (negative) and back to 300 (positive). So it has two IRRs
Same idea for project B.
Hope that helps.作者: Penny-wenny 时间: 2011-7-11 15:13
c
Project B has multiple neg CFs - so pot. multiple IRRs
Project A has none...as initial CF is a +ve one作者: waldziuchna 时间: 2011-7-11 15:13
I think it's A.
I think it is when the sign of the cash flow changes more than once, can someone elaborate?作者: dontknow1987 时间: 2011-7-11 15:13
Then when will a project have no IRR?作者: mnieman 时间: 2011-7-11 15:13
Project A has multiple.
B has one IRR = 0
Can't you check this by putting CF's into your calc? If it errors you have multiple IRR's.作者: Mechanic 时间: 2011-7-11 15:13
jblamb - I took your approach and got this wrong.作者: ishfaque 时间: 2011-7-11 15:13
The answer is C.
Earlier in this thread "cpl123" did some maths and showed that B has IRR values of 0% and 100% and so has multiple(2) real values.
For the solution for A, he left the formulation as a quadratic equation which has 2 roots but both roots are imaginary so no real roots.
