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hello …my question is why do we need to calculate IRR in order to calculate cost of redeemable debt. As irr give break even cost of debt , i.e amount invest today is equivalent to pv of futher cash flow .As investor want more return he would not want the return (flow of cash from debt)which is equivalent amount invested today.,investor obviously wants a return which is above the cost of capital……. or it is assumption or base that investor will want at least the retun that derived by calculating irr….
The IRR gives the return that the investor wants. Don’t forget that it is investors who fix the market value and so if they wanted a higher return they would pay a lower market value.
What determines the return they want is not the cost of capital – it depends on what returns they can get on other investments, together with how risky they regard the investment.
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