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Part (b)
I have calculated IRR for Process Omega using DF of 13% and 20% but resulted with IRR of 25.6%. This is lower than IRR of Process Zeta so on the basis of IRR, Process Zeta should be selected as it gives the highest IRR.My answer above are totally different with the examiner’s answer which calculated IRR for Process Omega using DF 12.75% and 30% and resulted with IRR of 27.3% which is higher than Process Zeta.
Why in this question using a slightly different DF could result in such a huge different of IRR?
In the exam, will I be marked wrong if I calculate IRR with 2 positive NPVs?Part (c)
In order to calculate 5 years value at risk (VAR) why the annual VAR must multiply by 5^(1/2) and not just multiply by 5?
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