RKI Instruments manufactures a ventilation controller designed for monitoring and controlling carbon monoxide in parking garages, boiler rooms, tunnels, etc. The net cash flow associated with one plant for the first 3 years of operation is shown. (a) What do the two rules about sign changes indicate concerning i* values? (b) Find all rate of return values between 0 and 100%.
What will be an ideal response?
(a) Two sign changes in the NCF series; maximum of two real-number i* values.
Norstrom's criterion indicates one positive value.
(b) 0 = -30,000 + 20,000(P/F,i*,1) + 15,000(P/F,i*,2) - 2000(P/F,i*,3)
i* = 7.43% per year (spreadsheet)
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What will be an ideal response?
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