A company that makes clutch disks for race cars has the annual net cash flows shown for one department. Year NCF, $1000 0 −65 1 30 2 84 3 −10 4 −12 (a) Determine the number of positive roots to the rate of return relation. (b) Calculate the internal rate of return. Is there a negative root? How is it treated? (c) Calculate the external rate of return using the return on invested capital (ROIC) approach with an investment rate of 15% per year (as assigned by your instructor, solve by hand and/or spreadsheet).
A company that makes clutch disks for race cars has the annual net cash flows shown for one department. Year NCF, $1000 0 −65 1 30 2 84 3 −10 4 −12 (a) Determine the number of positive roots to the rate of return relation. (b) Calculate the internal rate of return. Is there a negative root? How is it treated? (c) Calculate the external rate of return using the return on invested capital (ROIC) approach with an investment rate of 15% per year (as assigned by your instructor, solve by hand and/or spreadsheet).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
A company that makes clutch disks for race cars has
the annual net cash flows shown for one department.
Year NCF, $1000
0 −65
1 30
2 84
3 −10
4 −12
(a) Determine the number of positive roots to the
(b) Calculate the
negative root? How is it treated?
(c) Calculate the external rate of return using the
with an investment rate of 15% per year (as
assigned by your instructor, solve by hand
and/or spreadsheet).
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