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Sir, in question 5 a(ii) of June 2009 paper, the answer suggested that IRR cannot be calculated on partial projects.
Could you please explain the reason?
Thanks
Because doing (for example) half of a project does not necessarily mean that the future cash flows will all be half of the current flows. We would need to know what the future cash flows were in order to be able to calculate the IRR.
But if in this case, if I was to (in exam) make an assumption that since the projects are divisible, all cash flows would be equally proportionate to the amount invested, then would it be fine to calculate IRR on part of the project?
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