choice of discount factor in IRR

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  • April 29, 2012 at 6:23 pm #52417
    Avatar of roby72s
    roby72s
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    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

    May 2, 2012 at 5:27 am #96932
    Avatar of johnmoffat
    John Moffat
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    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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