IDEAS home Printed from https://ideas.repec.org/a/taf/uteexx/v57y2012i2p101-118.html
   My bibliography  Save this article

The Limited Relevance of the Multiple s

Author

Listed:
  • Moshe Ben-Horin
  • Yoram Kroll

Abstract

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.

Suggested Citation

  • Moshe Ben-Horin & Yoram Kroll, 2012. "The Limited Relevance of the Multiple s," The Engineering Economist, Taylor & Francis Journals, vol. 57(2), pages 101-118.
    • Handle: RePEc:taf:uteexx:v:57:y:2012:i:2:p:101-118
    DOI: 10.1080/0013791X.2012.677113
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/0013791X.2012.677113
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0013791X.2012.677113?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mária Illés, 2020. "The Positive Net Present Value of Loss-making Projects: Economic Content of the Two Internal Rates of Return," Theory Methodology Practice (TMP), Faculty of Economics, University of Miskolc, vol. 16(02), pages 41-50.
    2. Giuseppe Bonazzi & Mattia Iotti, 2016. "Evaluation of Investment in Renovation to Increase the Quality of Buildings: A Specific Discounted Cash Flow ( DCF ) Approach of Appraisal," Sustainability, MDPI, vol. 8(3), pages 1-17, March.
    3. Ben-Horin, Moshe & Kroll, Yoram, 2017. "A simple intuitive NPV-IRR consistent ranking," The Quarterly Review of Economics and Finance, Elsevier, vol. 66(C), pages 108-114.
    4. Vicente Alcaraz Carrillo De Albornoz & Antonio Lara Galera & Juan Molina Millán, 2018. "Is It Correct to Use the Internal Rate of Return to Evaluate the Sustainability of Investment Decisions in Public Private Partnership Projects?," Sustainability, MDPI, vol. 10(12), pages 1-15, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:uteexx:v:57:y:2012:i:2:p:101-118. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/UTEE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.