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Irr calculation
Can anyone tell me after calculating pay back period and PV Factor, how do I find an approximate rate for interpolation?
Replies (5)
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
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?
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
That is actually (L2- L1)
Oh ok. Thanks a lot 😊
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