• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

IRR

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › IRR

  • This topic has 3 replies, 2 voices, and was last updated 12 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 1, 2013 at 10:36 am #124129
    hasanali95
    Member
    • Topics: 239
    • Replies: 248
    • ☆☆☆

    When we have calculated the NPV of a project which has cash flows in perpetuity,then while calculating the IRR we use thesame way as we do with normal projects right?

    Cz in the bpp book they have done PV of cost=PV of benefits
    So im getting a different answer cz i chose a higher dis rate to get a negative npv then put that into ur formula
    Pls help

    May 1, 2013 at 4:14 pm #124179
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You can calculate it by making two guesses – the normal way.

    However if all the flows are in perpetuity then you can easily get the answer precisely without making two guesses.
    For example, if the flows are
    0 (100,000)
    followed by 1 to infinity of 12,000 per annum,

    then the IRR is 12,000 / 100,000 = 12%.
    (This is because to discount a perpetuity, we multiply by 1/r to get the PV. Since the NPV has to be zero, then 12000 x (1/r) must equal 100,000)

    This only works with a perpetuity.

    Making two guesses will give a slightly different answer because the two guess approach only gives an approximation because the relationship is not linear.

    (I don’t know what you mean about putting it into my formula – I don’t use a formula 🙂 )

    May 2, 2013 at 8:57 am #124244
    hasanali95
    Member
    • Topics: 239
    • Replies: 248
    • ☆☆☆

    Thanks sir 🙂
    (I meant ur way of doing it)

    May 2, 2013 at 2:37 pm #124342
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • OmarAlbeity on ACCA BT Chapter 6 – Some legal obligations – Questions
  • Salimbek909 on The nature and structure of organisations – ACCA Paper BT
  • Sefater on Chapter 3 – Property Income and Investments – Individuals TX-UK FA2023
  • adityachaudhry on Discounted cash flow techniques (part 3) – ACCA (AFM) lectures
  • nuripamir on ACCA Administrative Review

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in