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Sir i just wanted to check in part b of this question for irr of process omega in bpp they have taken two rate as 12.75% and 30% so the irr came as 27.9
And i took the rate as 5% and 10% and i got irr as 21% so am i wrong or right. Please tell me. Thanks.Because the relationship between the NPV and the rate of interest is not linear, different ‘guesses’ will give different answers.
That is not a problem for the exam – if you are calculating correctly using your guesses then you will still get more marks.
The one thing that I would add however, is that best would have been to do 10% first (because it is in the middle of the tables) and if you had, then it would have been obvious that the IRR was more than 10% and so you would have made your second guess at a higher rate. You would still have got an answer different from BPP, but it would not have been as much different 🙂
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