Which of the following statements is CORRECT? a. Projects with "normal" cash flows must have two changes in the sign of the cash flows, e.g., from negative to positive to negative. If there are more than two sign changes, then the cash flow stream is "nonnormal." b. The "multiple IRR problem" can arise if a project's cash flows are "normal." c. Projects with "normal" cash flows can have two or more real IRRs.

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Here is the complete question:

Which of the following statements is CORRECT?

a. Projects with "normal" cash flows can have only one real IRR.

b. Projects with "normal" cash flows can have two or more real IRRs.

c. Projects with "normal" cash flows must have two changes in the sign of the cash flows, e.g., from negative to positive to negative. If there are more than two sign changes, then the cash flow stream is "nonnormal."

d. The "multiple IRR problem" can arise if a project's cash flows are "normal."

e. Projects with "nonnormal" cash flows are almost never encountered in the real world.

A normal or conventional cash flow is when there's a negative cash flow followed by postive cash flows. Example : Cash flows in year 0,1,2 are $-50, $100, $70 respectively.

A non-normal or non conventional cash flow is when there's a negative cash flow, followed by a positive cash flow then a negative cash flow. Example: Cash flows in year 0,1,2 are $-50, $100, $-70 respectively.

IRR is the discount rate that equates the after tax cash flows from an investment to the amount invested.

Multiple IRR is when a cash flow has more than one IRR.

Multiple IRR only occurs with non normal cash flows.

Normal cash flows cannot have more than one IRR.

I hope my answer helps you.