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crisa0702 says

How do I calculate the discount factor for a 12.5% discount rate? Thank you

John Moffat says

You use the formula that is given at the top of the formula sheet (depending on whether you want the normal discount factor, or the annuity discount factor).

I go through this in the previous lecture.

cediva20 says

Thank you for help.

One question though..in the test post the chapter I’m not understanding why 8% was used to arrive at the IRR of 18%. I did get 18% but this was done the long way.

Please assist

John Moffat says

I don’t know what you mean by ‘the long way’- there is only one way of doing it, making two ‘guesses’ and then approximating between them.

Since we had already been asked to calculate the NPV at 12%, we had one value. You could try any rate of interest for the second value – my answer tried 20%.

(8% is the difference between 20% and 12%).

cediva20 says

Thank you

John Moffat says

You have asked this question twice, and I have already replied to the first one.

Morganne says

This was very helpful thank u but can u work this question for me plz

An investment has the following inflows and outflows

Time Cash flow per annum

0 (20,000)

1-4 3,000

5-8 7,000

10 (10,000)

What is the net present value of the investment at a discount rate of 8% ?