The Limited Relevance of the MultipleIRRs

Autor:	Yoram Kroll, Moshe Ben-Horin
Rok vydání:	2012
Předmět:	Terminal value Economics and Econometrics Actuarial science General Engineering Economics Internal rate of return Relevance (law) Cash flow Investment (macroeconomics) Net present value Education Sign (mathematics)
Zdroj:	The Engineering Economist. 57:101-118
ISSN:	1547-2701 0013-791X
Popis:	We find that the incidence of multiple internal rate of return (IRR) pitfalls are rare. This might partially explain the widespread use of IRRs by practitioners. When a project's cash flow has only two sign variations, the IRR rule is simple. For analyzing the case of three or more sign variations in the cash flow, we assume a non-negative sum of the future anticipated cash flows. Given this assumption, we present necessary and sufficient conditions for an investment's cash flows with three or more sign variations to have multiple IRR solutions. Based on these conditions we show that the confusing multiple IRR solutions are only possible under unrealistic large fluctuations of the cash flows.
Databáze:	OpenAIRE
Externí odkaz:	https://explore.openaire.eu/search/publication?articleId=doi_________::3609fb6f169ab27d4ae2e7ab82fe3d63 https://doi.org/10.1080/0013791x.2012.677113 Zobrazit plný text záznamu Plný text ve formátu PDF Plný text ve formátu HTML
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