Solution(a) The net cash flows will

Solution
(a) The net cash flows will appear like those in Figure 7–5 a with an initial investment of
$400,000, annual net cash flow (NCF) of $75,000 for years 1 through 10, and a phaseout
cost of $300,000 in year 10. Figure 7–6 details the NCF series (column B) and cumulative
NCF (column C) for use in the two tests for unique and multiple i* values. The
series is nonconventional based on the sign changes throughout the series.
Test #1: There are two sign changes in the NCF series, which indicates a possible
maximum of two roots to the polynomial equation or i* values for the ROR
equation.
Test #2: There is one sign change in the cumulative NCF series, which indicates a unique
positive root or one positive i* value.