# The Cost of Capital (part 3)

### Comments

• says

Which bit don’t you get?

In order to calculate an IRR (whether it is for project appraisal or for calculating a cost of debt) we need to guess at two interest rates (any two guesses) and then approximate between them.

If you are not familiar with calculating an IRR, then the F2 and F9 lectures may help you.

• says

so can i stick to 5% and 10% on guesses

1. says

I am unable to view the video, despite deleting the cookies. I also loaded the latest Adobe Flash player.

However I was able to view the video on another PC.

• says

No idea why your pc fails to load lectures,, try another browser. Or contact your Internet provider?

2. says

Hi sir.This one is regarding MACAULAY DURATION . in bpp text it says when yield decreases duration increases but in an example i did(opentuition notes.ch8.Example4) lowering the yield has now effect on the duration.Why is that ?

3. says

hi , I know this is a noob question at this level but why in example 10 when i use 10% and 15% to calculate IRR i get the different value in comparison to what you have used in the question. I recall this has something to do with using one possitive npv and one negative for IRR calculation.But please would u be kind enough to elaborate.Thanks

• says

You can use any two guesses to calculate the IRR, but because the relationship is not linear then different guesses will give slightly different answers.
This is not a problem in the exam – you get full marks.

Ideally we would have one positive NPV and one negative, but even that is not essential .

4. says

Please help…..i keep on getting this message when i click play on the vedio “The page you tried to find does not exist, please choose below:”

5. says

In example 10 the an annuity for 6% was incorrectly used that is 4.917. It should be at 5% for 6yrs at 5.076 as the disc rate for 5% in 6 yrs was used. This is where IRR was being calculated for cost of Debt to the company. I know the concept remains the same and was just an error but for future reference i thought i should just mentioned it… the IRR was actually 7.5% not much of a difference any ways

• says

Thanks – I will check the lecture tonight (and the answer at the back of the course notes) and if it is wrong, then I will have it corrected. (I cannot check at the moment because I am away from home).

I do apologise if I have made a mistake.

• says

Your welcome… But mistakes happen sometimes. I only mentioned it so for future reference. However, when i looked at the last lecture on Cost of capital, that is the lecture on EXAMPLE 10 only. The correct rate was used there. But i must say your lecture help me understand the Cost of Capital so well. Thanks a mil. You are doing a great Job. Thanks again.

6. says

I can’t play the videos on my iPad. Does anyone know why and how I can resolve this?

• says

lectures do play on the ipad. maybe your internet is behind a firewall. contact your internet provider for check this for you

7. says

Its very useful to students, but videos are do not opened arising the some errors, please rectify
thank u

• says

@gellisk, videos play fine

Your PC or your internet connection is the problem

• says

@admin, am not able to view video lectures it reads server not found

• says

@lyford, you are behind a firewall, ask your internet provider for help

8. says

Another great work by John with a negligible error. Thanks a lot sir.

9. says

in the example of 9, he calculated the Ke by using the market value post dividend. is there anything wrong? the formula shows that the market value of shares in it should be ex div.

• says

yes, it is on example 10, but it only makes difference of 0.01% in the answer. I got 13.55% as WACC

10. says

the discount factor for the annuity at 6 years for 5% is 5.076.
in this answer where they they get 4.917?