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Irr calculation

Aparna (Article) (56 Points)

25 October 2014

Can anyone tell me after calculating pay back period and PV Factor, how do I find an approximate rate for interpolation?

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5 Replies

sreeja reddy (Student CA IPC / IPCC) (79 Points)
Replied 26 October 2014

Just find npv at two different guess rates so that one npv gets +ve and the other gets -ve.take +ve ones rate as l1 and -ve as l2 Then apply in following formula. L1 + npv @ L1 -------------------- + (L2-L2) Npv @ L1- npv @ L2 Remember that guess rates must be consecutive

Aparna (Article) (56 Points)
Replied 26 October 2014

Thanks a lot Shreeja. But my doubt was on what basis should i guess that rate? There should be a range within which I should choose right? How do I find that?

sreeja reddy (Student CA IPC / IPCC) (79 Points)
Replied 27 October 2014

To reduce the npv,u must increase the cost of capital% For ex:- If u get npv as 500. @ cost of capital 10% U must reduce the npv to 0 or less. So u must take higher cost ofcapital say 15%.try for two to three rates.u will get