IRR / Linear Interpolation DF %'s

DDean8y ago

I have a question regarding which discount factor percentages to use when calculating IRR. Each combination of %'s even though I make sure I have a positive and negative present value result in the IRR calculation, will provide me with a different answer after the Linear Interpolation calculation. So in an exam, how am I supposed to know which DF %'s they have used to get their answer?

P2-D2Tutor8y ago#1

Hi, The exam wouldn't try to trip you up on this so don't worry about it too much. Thanks

EEmily8y ago#2

Hi Can you expand on the exam not tripping us on this one. does it mean there will not be a question which will require us to calculate the IRR or they will state which discount factors to use. Or do the questions usually require 5% and 10% DF's only. kindly assist

P2-D2Tutor8y ago#3

Hi, They couldn't give you answers whereby you'd get it wrong just because you've chosen different rates to somebody else. Thanks

IImogen7y ago#4

I have a different problem. In that the formula I have for the interpolation from the Kaplan textbook p. 35 is different from the one I took down in the redeemable debt section in the lecture and they don't calculate out the same, but maybe I'm missing something. Kaplan has: L+ (NPVL / (NPVL-NPVH)) (H-L) my lecture notes have: L+(NPVH/(NPVH-NPVL)) (H-L)

IImogen7y ago#5

Thanks in advance

P2-D2Tutor7y ago#6

Hi, I don't use L and H, I use A and B instead as that is how I was taught. Based upon what you state above it looks like the first formula is correct. Thanks