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Hey! I still can’t figure out, how to use IRR function in excel. Could you please explain the formula and I wil apply as it is
Also, what are the ways in which risk of project can be assessed?
Is it different from investment appraisal techniques?
Although it is not excel in the exam (but similar) you certainly can use the NPV and IRR formulae in the exam.
If you go to this page on the ACCA website:
https://www.accaglobal.com/gb/en/student/exam-support-resources/f5-f9-specimen-exams/guide-to-specimen-exams.htmlThen near the bottom of the page is a link to “Guide to ACCA session CBEs” and in the booklet that downloads are listed all of the spreadsheet formulae that are available, and also how they should be input. (I cannot give you the link directly to the booklet because it links to a pdf document).
Also, if you follow the link to ‘Revision Kit Live’ on our main Paper FM page you will find a lecture working through a CBE past question in full. The question does not require the IRR but it does want the NPV and the formula is entered in a similar way.
I explain how we can deal with the risk of a project in my free lectures on ‘Investment appraisal under uncertainty’.
I have watched CBE videos and revision live video as well but IRR is not explained anywhere. I have understood about NPV FUNCTION. I ahve tried calculating IRR in excel, with some solution at the back in book. Basically copied cash flow to calculate IRR.
We are using 2 discount rates for IRR, I can use NPV to find out the present value of bothe discount rates but actuall IRR formula L+npl/npl+nph)h-lDo we go to calculate this rate manually?
If I use inbuilt IRR formula =irr(cash flow, discount rate) gives me wrong answerThe in-built formula does not give the wrong answer!! It gives a precise answer (whereas using two guesses only obviously gives an approximation).
As explained in the ACCA booklet, you do not need to type a discount rate.
You type =IRR and then highlight all of the cash flows of the project typing brackets round them (in the same way that I do in my lecture when using the NPV formula)
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