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Here the NPV calculation for the annuity factor for 1-4 =110000/40000 =2.75
Here NPV cal would be 40000×2.75 – 110000=0
Here 4yr annuity factor to 2.75 closest is 2.743 is 17% so can we calculate without seeing the table and how can we calculate
As the ans is 17-10/10=70%
It is difficult to find the annuity factor for closest 2.75 as it takes lot of time searching for it.. Pls explain the alternative solution for itI don’t understand how you can say that it takes a lot of time searching for it – all you need to do is run your finger along the 4 year row!
The alternative is to calculate the IRR in the normal way. I assume that you know how to calculate the IRR, because it is certain to be asked in the exam (although more likely in calculating the cost of redeemable debt finance). It does however take a bit longer if you calculate the IRR as opposed to working backwards using the tables.
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