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SIGN TESTS FOR ACTUAL INVESTMENTS WITH LATTER PERIOD NET CASH OUTFLOWS
Author(s) -
Grimlund Richard A.,
Capettini Robert
Publication year - 1983
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1983.tb00414.x
Subject(s) - sign (mathematics) , cash flow , net present value , investment (military) , cash , internal rate of return , net (polyhedron) , rate of return , value (mathematics) , econometrics , feature (linguistics) , return on investment , test (biology) , economics , mathematics , finance , statistics , microeconomics , production (economics) , geometry , mathematical analysis , paleontology , politics , political science , law , biology , linguistics , philosophy
Easily calculated sign tests are presented for analyzing the net present value characteristics and the number of internal rates of return of two important practical cases of cash flow patterns with multiple sign changes. Using two tables which summarize the test procedures, it is possible for a decision maker to economically proceed from simple to more advanced procedures (as needed) when analyzing these cash flow patterns. Also considered is a deceptive feature of certain investment projects which have cash flows with multiple sign changes and a unique internal rate of return. A sign test is presented for ruling out this potential problem.