Hello Tutor,
Could you kindly confirm if my understanding is correct regarding IRR? I understand IRR is the discount rate where NPV is zero. Breakeven point where your earning is equal to the cost of capital?
Thank you.
Ask the Tutor ACCA FM
IRR
5y ago#1Your understanding of the IRR is correct.
However your last sentence does not make sense. Breakeven point is a term used in Paper PM and has nothing to do with the cost of capital.
For Paper PM, if the IRR is the same as the cost of capital then the NPV will be zero.
I do suggest that you watch my free lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
Okay, Thank you very much.
God bless.
5y ago#3You are welcome :-)
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