Multiple rates of return

Multiple rates of return

More than one rate of return from the same project that make the net present value of the project equal to zero. This situation arises when the IRR method is used for a project in which negative cash flows follow positive cash flows. For each sign change in the cash flows, there is a different rate of return.

Multiple Rates of Return

A situation in which the internal rate of return for a project has more than one value. The internal rate of return is the present value of cash flows that will result in a project breaking even; multiple rates of return occur when one calculates cash inflows and cash outflows in the internal rate of return.
References in periodicals archive ?
Another drawback to IRR is that irregular or unusual cash flows can produce multiple rates of return, leaving us to wonder which one is right.
Another consequence of IRR's calculation of multiple rates of return is that IRR and NPV can produce different recommendations as to whether a project should be accepted or not.
4 Multiple rates of return An oil company is considering a 50m [pounds sterling] investment to develop an oil field.
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