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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Internal Rate of Return (IRR) problem
Hi,
If a project has the following cash flows:
Yr0 (100)
Yr1 25
Yr2 25
Yr3 30
What would be its IRR and how would we calculate that?
There is no IRR. (In theory there is, but it is negative and would be meaningless).
The reason is that that the NPV is negative whatever the rate of interest is (even if interest rate was zero, the NPV would be negative), and therefore the project is never worth accepting.
Ok… But isn’t there any way to calculate that negative IRR? How does excel calculates that?
You can approximate it the normal way by making two guesses.
I don’t know about excel – I never use excel for it because I am only ever doing it for exam purposes 🙂
🙂 Ok thanks alot. i have calculated that finally