QUESTION 7 According to Descartes rule of signs how many pos

QUESTION 7 According to Descartes\' rule of signs, how many possible i values are there for the following cash flow: Year Revenue, $ Cost, $ 0,000 8,000 Ren 5 120700.00003000040.00 12,000 6,000 8000 15,000 3,000 -12,000 a. Two b. Five C.One d. Four

Solution

Descarte\'s rule states that the possible value of i* is always equal to number of sign changes occured in the series

We will consider Net Cash flow here and they are

1 (12000=15000)=-3000

2 (7000-3000)= 4000

3 (8000-12000)=-4000

4 (30000-6000)=24000

5 (40000-8000)=32000

Sign of Net Cash flows has changed 4 times

Therefore Option D is correct answer