Hello I have something to ask in regard of the choice of the discount rate when calculating the IRR. For example in question 1 from December the discount rate is 11%: the pv of the project is positive so we choose an higher discount rate to calculate the second npv. I used 16% however when calculating the npv it was positive instead of negative. then I used 17% and I obtained a negative npv. IN the exam using 16% would have been time consuming: is there a way of deciding which is the best way of deciding which is the second discount rate to use? Many thanks Roberto
There is no best way of deciding.
However using 11% and 16% is fine – even if you get two positive NPV’s you can still estimate the IRR.
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