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Hi John
Just been attempting Specimen exam and Q31 (Section C) contains a question about finding IRR.
Both the NPVs I got from 10% & 15% were positive (10% first) – I calculated the IRR using these figures anyway and the end result wasn’t too different to what is in the answers (17.6% vs 18.2%)
My questions is, is it OK to do this in the exam? – calculate IRR based on 2 positive NPVs?
Otherwise, how would I have known to go up to 20% rather than 15%?
Many thanks in advance
As I do explain in my free lectures, any two guesses are OK. Different guesses will give a slightly different IRR because any answer using two guesses is only approximate. However it will get full marks in the exam.
Appreciate that you can use the IRR function on the spreadsheet and that will give an exact IRR. However you still get full marks either way.
That’s great, thank you for your response John.
Just so I’m clear, are you saying that in the exam if there’s an IRR question, there is no need to calculate a second lot of present values at a different cost of capital, but rather I can just use the =IRR function and I would still get full marks?
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