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Problem1. describe how you reached the answer or show your work if a mathematical calculation is needed, or both. Which of the following statements is right?

a. When you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal cash flow at Time 0.

b. When you have series of cash flows, and CF0 is negative however each of the following CFs is positive, you can solve for I, however only if the sum of the undiscounted cash flows exceeds the cost.

c. To solve for I, one should identify the value of I that causes the PV of the positive CFs to equal the absolute value of the PV of the negative CFs. This is, fundamentally, a trial-and-error procedure that is easy with a computer or financial calculator but quite difficult otherwise.

d. If you solve for I and acquire a negative number, then you should have made a mistake.

e. If CF0 is positive and all the other CFs are negative, then you can’t solve for I.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M94007

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