Examines the problem of multiple solutions in relation to the useof the internal rates of return IRR as a decisionmaking criterion.Attempts to show that positive multiple IRRs occur only in a limitednumber of cases and in such cases the IRR is not the appropriate measureof return. Argues instead that the true rate of return for such projectsis shown to be dependent on the cost of capital. Suggests two methods todeal with this problem the extended yield method and the return oninvested capital method.
Journal of Valuation – Emerald Publishing
Published: Mar 1, 1989