Question

Which of the following statements is CORRECT?a. Projects with "normal" cash flows can have two or more real IRRs.b. Projects with "normal" cash flows can have only one real IRR.c. Projects with "normal" cash flows must have three or more two changes in the sign of the cash flows, e.g., from negative to positive to negative.d. The "multiple IRR problem" can arise if a project’s cash flows are "normal."

Answer 1

b. Projects with "normal" cash flows can have only one real IRR.

Step-by-step explanation:

When we use the term normal cash flows it means the project will have initial cost that will be negative cash outflow and all the upcoming project inflows are positive. Thus, resulting into single IRR

When a project has non normal cash flows that is negative then positive then again negative, that results into a multiple IRR problem.

As with normal cash flows there can only be single IRR.

Thus, correct statement is B

Projects with "normal" cash flows can have only one real IRR.