Abstract The article focuses on the research paper "A Problem in Discounted Cash Flow," by Billy E. Goetz, published in an earlier issue of the journal The Accounting Review. The paper described a procedure for constructing discounted cash flow examples with multiple yield rates of return. According to the author, the method is not a rare cubic equation with five real and unequal roots. Rather, applying three-place tables to that example produces essentially random numbers for the project's excess present value at discount rates between 7 and 33 percent approximately, the range in which both the actual yields and the 5 apparent yields lie. However, if the example is solved algebraically or by using four-place tables, the actual yields are discernible. The resolving capacity of iterative solution methods depends on the number of places or significant digits in the present value tables being used. Making the comparison at the local extremes establishes a minimum necessary condition for the example to be compatible with the tables being used.
Earl Littrell (Mon,) studied this question.