Teaching Students about Two Positive IRR Roots for the PWEquation: Theory and Case Studies

摘要

Multiple roots for the internal rate of return (PW = 0) equation are addressed theoretically by describing the solutionto all problems that consist of P, A, and F cash flows with boundary conditions for no, single, and multiple real rootsof positive and/or negative sign. Specific examples addressed include the oil pump problem from Lorie and Savage,and projects requiring environmental remediation at termination. The results have implications for teaching aboutproblems with multiple roots (especially two positive roots).