How many possible IRRs could you find for the following set of cash flows? Time0 1 2 3 4Cash Flow–$201,000 –$37,350 $460,180 $217,020 –$5,000

Number of IRRs in unconventional cash flows are number of times the polarity changes.

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How many possible IRRs could you find for the following set of cash flows

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter11: The Statement Of Cash Flows

Section: Chapter Questions

Problem 10MCQ

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Concept explainers

Cash Flow Statement Analysis

A company's cash flow is the movement of its cash inflows and cash outflows. A cash flow statement is prepared to determine changes in an organization's cash position. A cash flow statement shows how much money was generated and spent on the business during the fiscal year. The cash flow analysis is a method of analyzing an organization's investing, financing, and operating activities. A cash flow statement reveals an organization's liquidity and solvency, as well as its ability to change cash flows in the future. It eliminates the other effects of accounting methods by improving the comparability of different organizations' operational performance.

Question

How many possible IRRs could you find for the following set of cash flows?

Time

Cash Flow

–$

201,000

–$

37,350

460,180

217,020

–$

5,000

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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