20,000 -90,000 50,000 -10,000 2 4 According to the rule of signs, there can be up to three |rate of return values. According to the cumulative cash flow test, the i"value is inconclusive The external rate of return according to the ROIC method is | %. The rate of return using the IRR function is -27 %. mt n J6

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
For the net cash flow series shown, (a) apply the two rules of sign change, (b) find the external rate of return using the ROIC method at
an investment rate of 15% per year, and (c) determine an i* using the IRR function with and without the ROIC determined in part (b).
A
Year
1
Net Cash Flow, $
2
48,000
1
2
20,000
-90,000
50,000
4
3
6
4
-10,000
According to the rule of signs, there can be up to three
v rate of return values.
According to the cumulative cash flow test, the i*value is inconclusive
The external rate of return according to the ROIC method is
%.
The rate of return using the IRR function is
-27| %.
Transcribed Image Text:For the net cash flow series shown, (a) apply the two rules of sign change, (b) find the external rate of return using the ROIC method at an investment rate of 15% per year, and (c) determine an i* using the IRR function with and without the ROIC determined in part (b). A Year 1 Net Cash Flow, $ 2 48,000 1 2 20,000 -90,000 50,000 4 3 6 4 -10,000 According to the rule of signs, there can be up to three v rate of return values. According to the cumulative cash flow test, the i*value is inconclusive The external rate of return according to the ROIC method is %. The rate of return using the IRR function is -27| %.
Expert Solution
steps

Step by step

Solved in 2 steps with 3 images

Blurred answer
Knowledge Booster
Property Damage
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education