Multiple Internal Rate of Return Revisited: Frequency of Occurrences

Abstract

Research in multiple internal rate of return (MROR) has mainly focused on three areas: uniqueness, conditions where MROR occur, and solutions to MROR. In an attempt to solve for MROR, researchers have assumed that the occurrence of MROR is prevalent and thus a solution is direly needed. This article examines the probability that positive MROR would occur when variation is incorporated into the cash flow and the probability of getting positive MROR when multiple sign-change cash flow is generated. Results show that the probability of positive MROR occurring in multiple sign-change cash flows is relatively low and potentially a rare event.

Additional information

Notes on contributors

Ean-Harn Ng

Ean-Harn Ng is a Research Assistant Professor at Oregon State University. She received her Ph.D. and M.S. from Texas Tech University and holds a B.S. in industrial and management engineering from Montana State University. Her areas of research interest include engineering economics, organizational behavior, engineering management, and engineering education.

Mario G. Beruvides

Mario G. Beruvides is AT&T Professor in Industrial Engineering at Texas Tech University. He received his Ph.D. from Virginia Polytechnic Institute & State University and holds a B.S. in mechanical engineering and an MSIE from the University of Miami. His major areas of interest are advanced economic analysis, engineering management, productivity and performance measurement, and operations and systems engineering. He is a registered professional engineer in the state of Texas.