4. (Newton's method) The IRR is generally calculated using an iterative procedure Sup- pose that we define / () = -ao+a+azd + +2", where all

a, 's are positive and > Here is an iterative technique that generates a sequence A, A, Ade estimates that converges to the root > 0, solving (X) = 0 Start with any o> 0 close to the solution Assuming A has been calculated, evaluate f'(x) = a +234 +3ajd + + na 2- and define J =- = (2) f'(x) This is Newton's method It is based on approximating the function by a line tangent to its graph at A, as shown in Figure 2.4 Try the procedure on f(2) = -1+2+ Start with and compute four additional estimates

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X6+1 2k FIGURE 2.4 Newton's method.