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Which of the Following Statements Is Correct

Question 3

Multiple Choice

Which of the following statements is correct?


A) If you have a series of cash flows, all of which are positive, you can solve for I, where the solution value of I causes the PV of the cash flows to equal the cash flow at Time 0.
B) To solve for I, one must 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, essentially, a trial-and- error procedure that is easy with a computer or financial calculator but quite difficult otherwise.
C) If you solve for I and get a negative number, then you must have made a mistake.
D) If CF0 is positive and all the other CFs are negative, then you cannot solve for I.

Correct Answer:

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