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The NPV appears to be behaving in a very peculiar fashion here. First, as the discount rate increases from 0 percent to 30 percent, the NPV starts out negative and becomes positive. This seems backwards because the NPV is rising as the discount rate rises. It then starts getting smaller and becomes negative again. What's the IRR? To find out, we draw the NPV profile as shown in Figure 9.7.

In Figure 9.7, notice that the NPV is zero when the discount rate is 25 percent, so this is the IRR. Or is it? The NPV is also zero at 33% percent. Which of these is correct? The answer is both or neither; more precisely, there is no unambiguously correct answer.

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