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Hello Mr John. Why is it that when calculating the sensitivity of cost of capital we 1st calculate the IRR.
I understand that NPV of zero is IRR by definition.
But for all the other variables we don’t 1st calculate the IRR .Correct. The IRR is only relevant if calculating the sensitivity of the cost of capital. It is because we need to know by how much the cost of capital can change before a NPV of zero. For the other variables we are assuming that the cost of capital does not change.
Have you watched my free lectures on this?
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