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#51
11-08-2004, 03:07 PM
 FlyingPig Member Join Date: Jul 2003 Location: Kansas City Posts: 34

I think it has to be 3. The sign changes are the roots. You want to know where NPV=0, there are 3 places where NPV=0, and that is where the signs change. If this wasn't an IRR problem it would be different.

Found this on the internet somewhere:

According to "Descartes’ rule of signs" there can be as many different IRRs as there are changes in the sign of the flows ("- + -" is two sign changes). With more sign changes, there could be more IRRs. Given there are two IRRs, which if either is meaningful?

http://members.tripod.com/~Ray_Martin/DCF/nr7aa003.html

I think it is 3.
#52
11-08-2004, 03:14 PM
 FlyingPig Member Join Date: Jul 2003 Location: Kansas City Posts: 34

And now that I think about it again, maybe the SOA was being tricky, but I think 3 is right strictly from the U,V,W,X,Y,Z. If we assume there is an investment at the beginning (negative CF), then we get 4. I think it comes down to exactly what the problem stated, and if the SOA expected you to assume certain things.
#53
11-08-2004, 04:03 PM
 Spank Doggy Dog Member Join Date: Aug 2004 Posts: 95

I put 4 and was sure it was 4, but it's 3 sign changes. Crap.
#54
11-08-2004, 04:26 PM
 D Member Join Date: Jun 2004 Posts: 170

count number of sign changed in f(x)=0 and f(-x)=0 will tell you in general, the number of possible soln.
The PLUS 1 crap doesn't make sense at all.
Assumed f(x) = c, a constant. there is no real soln to it.
#55
11-08-2004, 04:29 PM
 MortalityMan Member Join Date: Oct 2004 Location: s-a-d Posts: 210

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#56
11-08-2004, 06:47 PM
 kel213 Member CAS Join Date: Nov 2004 Location: CA Posts: 126

It is definitely 3, no doubt.
#57
11-09-2004, 07:57 AM
 Spank Doggy Dog Member Join Date: Aug 2004 Posts: 95

3 i's I mean.

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