Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Introduction to Investments in Securities

Financial Accounting

7. Receivables and Investments

Introduction to Investments in Securities

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Multiple Choice

Given the following set of cash flows: Year 0: $-\$1,000$, Year 1: \$2,000\), Year 2: $-\$1,500$, how many possible internal rates of return (IRRs) could exist for this investment?

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Verified step by step guidance

Understand the concept of IRR: The Internal Rate of Return (IRR) is the discount rate at which the net present value (NPV) of cash flows equals zero. It is used to evaluate the profitability of an investment.

Recognize the relationship between cash flow sign changes and IRRs: The number of possible IRRs is determined by the number of sign changes in the cash flow sequence. Each sign change represents a potential IRR.

Analyze the cash flow sequence: Year 0 has a cash flow of \$-\\$1,000\$, which is negative. Year 1 has a cash flow of \\$2,000\\), which is positive. Year 2 has a cash flow of \$-\\$1,500\$, which is negative. This sequence has two sign changes: from negative to positive (Year 0 to Year 1) and from positive to negative (Year 1 to Year 2).

Apply Descartes' Rule of Signs: According to this rule, the number of possible IRRs is equal to the number of sign changes in the cash flow sequence. Therefore, there are two possible IRRs for this investment.

Conclude the analysis: While there are two possible IRRs, further calculation or graphing would be required to determine their exact values. This step focuses on identifying the number of possible IRRs based on the cash flow pattern.