When examining a capital project with non-normal cash flows from the perspective of IRR, some distinct problems can arise, which of the following choices best describes the problems that can occur when examining projects with non-normal cash flows using IRR?
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A. B. C. D. E.Explanation
When examining capital projects with non-normal cash flows, three distinct problems can occur: the project can have multiple IRRs, no IRR, or the calculation can lead to the production of an IRR figure which leads to an incorrect accept/reject decision. Thus, the second choice represents the most correct answer. "Timing differences" and "project scale differences" are two reasons for a conflict in the NPV and IRR calculations, and "MIRR profile" is a fictitious term.