Cost of redeemable debt

1. It does not matter whether the debt is redeemable at par or redeemable at a premium. In all cases you calculate the IRR by making 2 'guesses'. 2. I don't understand your problem. You make any reasonable 2 guesses to calculate the IRR. If the NPV at the first guess is positive then your second guess will be at a higher rate. If the NPV at the first guess is negative (as it is here) then your second guess will be at a lower rate. In either case the workings that follow are exactly the same. (Just as when calculating the IRR for a project in both Paper FM and in Paper F2. If you are still unclear then have a look at the Paper F2 lectures ioan investment appraisal.)