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What do you look for when you are picking variables when you are using the IRR when are calculating the cost of debt. I seem to have a challenge. I know that when you pick the first variable and the answer is positive you have to pick a higher variable and vice versa.I have tried this principle but in some cases I get both negatives. So what is that I am missing from questions. Kindly help.
If you want for me to answer then you should ask in the Ask the Tutor Forum – this forum is for students to help each other 🙂
If its positive the first time, you pick a higher percentage as the project is clearly giving you more than the initial % you selected.
I usually start @ 5%, and work from there, either going up to 10% if my first answer in positive, or down to 2% if negative.Even if you get two positives which I sometimes get, it should still be fine when using the formula. Just make sure you are entering the numbers in the correct order in your calculator.
Hope that helps.
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