Which of the Following Statements Is CORRECT

question 13

Multiple Choice

Which of the following statements is CORRECT?

• A) If CF0 is positive and all the other CFs are negative, then you can still solve for I.
• B) If you have a series of cash flows, each of which is 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.
• C) If you have a series of cash flows, and CF0 is negative but each of the following CFs is positive, you can solve for I, but only if the sum of the undiscounted cash flows exceeds the cost.
• D) 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 FV of the negative CFs.It is impossible to find the value of I without a computer or financial calculator.
• E) If you solve for I and get a negative number, then you must have made a mistake.

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Definitions:

Affects

Impacts or influences an outcome, result, or condition.

Common Stock

An equity security that represents ownership in a corporation, entitling holders to vote at shareholder meetings and receive dividends.

Net Cash

The amount of cash available after accounting for cash inflows and outflows over a particular period.

Operating Activities

Activities directly related to the primary business operations, including the production, distribution, and sale of goods or services.