Questions: If a project has multiple IRRs, which of the following is true? The project should be rejected. The project may have a positive NPV between the IRRs. Only the highest IRR should be considered. NPV cannot be calculated for this project.

The answer is the second one: The project may have a positive NPV between the IRRs.

Explanation for each option:

1. The project should be rejected.

   • This is incorrect. The presence of multiple IRRs does not automatically mean the project should be rejected. It indicates that the project has non-conventional cash flows, and further analysis is needed to determine its viability.

2. The project may have a positive NPV between the IRRs.

   • This is correct. When a project has multiple IRRs, it means that the NPV curve crosses the x-axis more than once. There can be regions between these IRRs where the NPV is positive, indicating that the project could be acceptable depending on the discount rate.

3. Only the highest IRR should be considered.

   • This is incorrect. Considering only the highest IRR can be misleading because it does not account for the possibility of multiple IRRs and the actual NPV profile of the project.

4. NPV cannot be calculated for this project.

   • This is incorrect. NPV can still be calculated for the project despite the presence of multiple IRRs. The NPV calculation is based on discounting the cash flows at a specific rate, which is always possible.

Summary: When a project has multiple IRRs, it indicates non-conventional cash flows, and there may be a range of discount rates between the IRRs where the NPV is positive. Therefore, the correct statement is that the project may have a positive NPV between the IRRs.