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IRR – Binomial expansion

Forums › ACCA Forums › ACCA AFM Advanced Financial Management Forums › IRR – Binomial expansion

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by mrjonbain.
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  • December 26, 2022 at 8:47 pm #675113
    jamescooke
    Participant
    • Topics: 2
    • Replies: 0
    • ☆

    Perhaps a silly question – if you were finding the IRR in practice/doing a sensitivity analysis on interest rate change etc
    would you ever find people using the binomial expansion and finding the solution algebraically? Or would it just be a numerical solution that they leave to the computer – I imagine Excel etc has something that might be more precise than the 2 NPVs and approximate method (though appreciate that in practice there might be limited benefit to greater precision given all the other uncertainties in forecasting assumptions etc)

    Best,
    James

    December 27, 2022 at 6:50 am #675122
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2421
    • ☆☆☆☆☆

    Welcome to the Opentuition forums. Excel can be used. Given potential importance of calculation, Excel might be used and then the solution checked using manual method to make sure no mistakes have been made.

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