Chap 7-2 - Contemporary Engineering Economics, 4 th...

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Unformatted text preview: Contemporary Engineering Economics, 4 th edition, 2007 Methods for Finding the Rate of Return Lecture No. 7-2 Chapter 7 Contemporary Engineering Economics Copyright 2006 Contemporary Engineering Economics, 4 th edition, 2007 Simple versus Nonsimple Investments Simple Investment : The project with only one sign change in the net cash flow Nonsimple investment : an investment in which more than one sign change occurs in the net cash flow series Contemporary Engineering Economics, 4 th edition, 2007 Example 7.1 Investment Classification Period n Net Cash Flow Project A Project B Project C 1 2 3 4-1,000-500 800 1,500 2,000-1,000 3,900-5,030 2,145 1,000-450-450-450 Project A: a simple investment Project B: a nonsimple investment Project C: a simple borrowing Contemporary Engineering Economics, 4 th edition, 2007 Predicting Multiple i *s Net Cash Flow Rule of Signs The number of real i*s that are greater than -100% for a project with N periods is never greater than the number of sign changes in the sequence of the cash flows. A zero cash flow is ignored....
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This note was uploaded on 12/06/2010 for the course IE 305 taught by Professor Wang during the Spring '08 term at Iowa State.

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Chap 7-2 - Contemporary Engineering Economics, 4 th...

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