For the net cash flow series, (a) determine the number of possible i* values using the two sign tests, (b) find the EROR using the MIRR method with an investment rate of 20% per year and a borrowing rate of 10% per year, and (c) use the MIRR function to find the EROR.
 FIGURE 1.png)
(a) Rule of signs test: up to 4 values
Cumulative CF sign test: inconclusive since S0 > 0
(b) PW0 = -2000(P/F,10%,2) - 7000(P/F,10%,3) - 700(P/F,10%,5)
= -2000(0.8264) - 7000(0.7513) - 700(0.6209)
= $-7347
FW6 = 4100(F/P,20%,5) + 12,000(F/P,20%,2) + 800
= 4100(2.4883) + 12,000(1.4400) + 800
= $28,282
-7347(F/P,i’,6) + 28,282 = 0
-7347(1 + i’)6 + 28,282 = 0
i' = (28,282/7347)1/6 – 1
= 0.252 (25.2%)
(c) Enter the NCF values in cells B1 (as a 0) through B7. The function
= MIRR(B1:B7,10%,20%) displays i'= 25.2%
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