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IRR And NPV

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

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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    Posts
  • June 21, 2021 at 2:55 am #625950
    Nikitagarwal
    Participant
    • Topics: 153
    • Replies: 146
    • ☆☆☆

    Hello Sir,
    Hope you are well!
    Ques –
    Year Option A
    $
    0 Capital outlay (10,200)
    1 Net cash inflow 6,000
    2 Net cash inflow 5,000
    3 Net cash inflow 3,000
    The company’s cost of capital is 16%.
    Now for IRR I have taken 16 and 20% however still the NPV is coming Positive 610 and 5 respectively then how can I got beyond 20% as we do not have discounting table for it and in that case how do we calculate the IRR ?

    June 21, 2021 at 6:56 am #625965
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    You can still use the same logic as normal just using 16% and 20% and I do show this in my free Paper MA lectures (and the answer would be a little bit more than 20%).

    However, given that you will be sitting the computer based exam it makes more sense (if it is part of a Section C question) just to use the IRR function on the spreadsheet provided and this will give the IRR without needing to make two guesses.

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