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A cash flow of -1000, +600, +600, -200 has how many sign changes?

  • A.0
  • B.2
  • C.1
  • D.3

Answer: B

Negative to positive is one change, positive to positive is none, and positive to negative is the second, so there are two in all. Descartes' rule therefore permits at most two positive roots, and the project is not a conventional investment.

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