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 Net Cash Flow, $ 48,000 20,000 1 2 3 1 4 -90,000 3 50,000 6. -10,000 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 inconclusiveO The external rate of return according to the ROIC method is 23.5 %. The rate of return using the IRR function is -27 O %.
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 Net Cash Flow, $ 48,000 20,000 1 2 3 1 4 -90,000 3 50,000 6. -10,000 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 inconclusiveO The external rate of return according to the ROIC method is 23.5 %. The rate of return using the IRR function is -27 O %.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
N6
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
В
1
Year
Net Cash Flow, $
2
48,000
3
1
20,000
4
2
-90,000
5
3
50,000
6.
4
-10,000
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
23.5
* %.
The rate of return using the IRR function is
-27
%.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
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)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
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-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education