Consider an investment with the following cash flows:

First cost             -$1 million

Year 1                 $1 million

Year 2                 $1.1 million

Year 3                 $1.3 million

Year 4                 $1 million

Year 5                 -$3.7 million

(a) Check for multiple rates of return.

(b) Find all rates of return between 0% and 100%. Hint: One way to do that is to plot the present worth of the cash flows as a function of the interest rate.

(c) Now determine what happens to the rate of return if the payment in year 5 is -$5.7 million. Explain.