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Hi again,
Have been working my way through the section C questions in the BPP revision kit in the Business Finance section. For the questions that require me to find the WACC, there are the parts that involve identifying the IRR when working with loan notes and convertible bonds etc.
The bit that i’m struggling with is identifying two different discount factors. Could you point me to how i can identify these in calculating the IRR? Question 218 for BKB Co is what i’m looking at? It’s not taking guesses i assume but there isn’t anything glaringly obvious from the text.
Many thanks.
Ellis
The idea is that you are trying to find the % that gives you a zero (npv)
Choose 10% as your first guess and then either 5% or 15% as the second, depending on whether the NPV at 10% was positive or negative.
For Section C questions there is no need to make two guesses anyway. It is more sensible to use the IRR function in the spreadsheet that is provided.
It is essential that you attempt the practice CBE exams on the ACCA website and that you make sure you know what functions are available and how to use them.Links to all of the resources about this on the ACCA website are in the last chapter of our free lecture notes.
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