- This topic has 3 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
Dear John Moffat, when calculating IRR, how to choose two discount, I always arrived at different answer from BPP practice kit.
many thanksYou really should watch our free lectures (and if necessary the relevant Paper F2 lectures, because calculating the IRR is revision from F2).
As I make very clear in the lectures, you can use any two interest rates in order to estimate the IRR but that because the relationship between the interest rate and the NPV is not linear using different guesses will give a slightly different answer.
That does not matter in the exam – the marks are for the workings and not for the final answer (it is impossible anyway to calculate a precisely accurate answer). If your answer is more than 1 percentage point different from the answer in the kit, then it probably means you have made a mistake.If you are asked for an IRR in Section A, then the question will tell you which two interest rates to use.
- You must be logged in to reply to this topic.