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There are times when calculating the IRR I am unable to get a negative NPV (sometimes, not even close to zero) when the highest rate of 20% is used from the NPV Tables.
What should I do in these instances? Is it OK to compute the IRR with these very high positive NPV? The results sometimes have a significant difference between IRR (40%) and the Cost of Capital (10%).
That will not be the case in the exam – in the exam the IRR will always be less than 20%.
However you can estimate the IRR in the normal way, even if you get two positive NPV’s.
Have you watched my free lectures on this?
Hi John,
Thank you for the response. Yes, I watched the video. From a practical perspective, if I am faced with the scenario I outlined, how should I go about this?
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