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Hi Guys,
Just a couple of days to go! I hope you are putting that last minute work required.
I have a question which may seem silly but still needs to be clarified. It’s about the cost of redeemable debt. In order to calculate the cost of redeemable debt we have to find the IRR of the debt using the interpolation formula. My understanding of IRR is that it’s the rate at which the net present value of the investment equal to zero. If that the case then doesn’t this mean that by calculating the IRR of the debt we are simply calculating the cost of the debt when the debt holder is not making any profits?
Anyone feel free to advise….
he is not making any losses either so we are trying to find minimum required rate of return at which he is in breakeven position
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