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AN ALGORITHM FOR DETERMINING UNIQUE NONNEGATIVE INTERNAL RATES OF RETURN
Author(s) -
Russell Allen M.,
Rickard John A.
Publication year - 1984
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.1468-5957.1984.tb00755.x
Subject(s) - sequence (biology) , polynomial , interval (graph theory) , mathematics , properties of polynomial roots , algorithm , cash flow , computer science , matrix polynomial , combinatorics , finance , mathematical analysis , economics , genetics , biology
The problem of determining an internal rate of return of a given sequence of cash flows is equivalent to solving a polynomial equation. Although Sturm's theorem determines the exact number of roots of a polynomial in a given interval, its application can be long and tedious. For this reason it has not been particularly popular with non‐mathematical practitioners. Recently, considerable effort has been devoted to finding tests or algorithms which are easier to apply. This paper introduces an old but useful theorem on the location of roots of a polynomial, elucidates recent results due to Clarke and others, and also offers some improvements.