Question 11 Your answer is incorrect. Norstrom\'s criterion cannot be applied to

Question

Question 11 Your answer is incorrect. Norstrom's criterion cannot be applied to indicate that there are at most two positive internal rate of return (IRR) values. Norstrom's criterion is applied cash flow series that begins with a negative cash flow and then only changes its cumulative cash flow value once. Given the following end-of-year cash flows, which one of the following statements is correct? End of year 0: -$10 End of year 1: $20 End of year 2: -$5 End of year 3: $10 End of year 4: $5 End of year 5: $10 By Norstrom?s criterion, there will be at most one positive internal rate of return (IRR) value. By Norstrom?s criterion, there will be at most two positive internal rate of return (IRR) values. By Norstrom?s criterion, there will be at most three positive internal rate of return (IRR) values. By Norstrom?s criterion, there will be at most four positive internal rate of return (IRR) values.

Explanation / Answer

The correct answer is:

Option c. By Norstrom's criterion, there will be at most three positive internal rate of return (IRR) values.

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