Conventional problem if there are multiple

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Unformatted text preview: + + - + +) (1 (500) 200 100 (200) 400 300 0 1 2 3 4 5 IRR is a good decision-making tool as IRR long as cash flows are conventional. conventional (- + + + + +) ( Problem: If there are multiple sign changes in the cash flow stream, we could get multiple IRRs. (- + + - + +) (1 2 (500) 200 100 (200) 400 300 0 1 2 3 4 5 IRR is a good decision-making tool as IRR long as cash flows are conventional. conventional (- + + + + +) ( Problem: If there are multiple sign changes in the cash flow stream, we could get multiple IRRs. (- + + - + +) (1 2 3 (500) 200 100 (200) 400 300 0 1 2 3 4 5 Summary Problem Summary Enter the cash flows only once. Find the IRR. Find IRR Using a discount rate of 15%, find NPV. Using 15%, NPV Add back IO and divide by IO to get PI. Add PI (900) 300 400 400 500 600 0 1 2 3 4 5 Summary Problem Summary IRR = 34.37%. Using a discount rate of 15%, Using NPV = $510.52. NPV PI = 1.57. (900) 300 400 400 500 600 0 1 2 3 4 5 Capital Rationing Capital Suppose that you have evaluated Suppose 5 capital invest...
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