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Sir,
Do i always need one positive NPV and one negative NPV to calculate IRR…Can’t i use two positive NPV insteadNo – you don’t need one positive and one negative.
However since the IRR is only ever an approximation (as I explain in my lectures), one positive and one negative will give a better approximation than two positives.
So sir,
In the exam suppose i guess 2 rate and both of them give me positive NPV so do i have to guess another rate to get negative NPV and to get better approximation as you say…..i want to know if such situation occur what i should do because in exam there will be time pressure
That problem will not occur in the exam. If it is in Sections A or B then you will be told what guesses to use.
If it is in Section C, then the marks are for the workings and not for the final answer, and so it does not matter what guesses you choose (provided of course they are not stupid. For example if your first guess is 10% and you get a positive NPV then it would be stupid to make a second guess at something less than 10% because the IRR must be higher than 10% 🙂 )
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