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John Moffat.
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Nikitagarwal
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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 ?
John Moffat
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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.
Nikitagarwal
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