IRR IPCC

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IRR matlab ek aisa rate jo Discounted inflows aur Disounted cash outflows ko equal kar de .. i.e a discount rate at which NPV of the project is equal to zero.

When we calculate NPV we have fixed discount rate given in the question and from there we find out the NPV

but this discount rate may not give NPV as Zero ..Hence we have to find out a discount rate which will make the NPV zero .

IRR IS THAT POINT WHERE NPV IS EQUAL TO ZERO.

IN THE QUESTION OF IRR DISCOUNT RATE MAY NOT BE GIVEN BUT WE WILL FIND NPV ACCORDING TO OUR ESTIMATE . IT MAY BE POSSIBLE THAT YOU MAY HAVE TO CALCULATE THE NAV FOR 4-5 TIMES IN A QUESTION

JUST TAKE THE DISCOUNT FACTOR SAY 10% THAN CALCULATE NAV LET THE NPV IS POSITIVE.

SIMILARLY CALCULATE IT WITH 15% , 20% 25% TILL IT IS NEGATIVE THAN APPLY FORMULA

LET THE NPV AT 20% IS 1 AND AT 25% IS -1 THAN IT WOULD BE CALCULATED A FOLLOWS:-

DISCOUNTED FACTOR AT WHICH NPV POSITIVE +DISTANCE TO BE TRAVELLED/DISTANCE ACTUAL TRAVELLED * SLAB

20%+1/2*5%= 22.5%

IF YOU WANT TO SOLVE THE QUESTION IN A HURRY THAN FIRSTLY CALCULATE NPV AT LOWER RATE SAY10% AND THAN AT HIGHER VALUE SAY AT 40%(IN THE ROUGH) AND ROUGHLY CALCULATE WHERE IRR LIES AND SIMPLY SHOW THE TWO NEAR DISCOUNT RATES IN THE QUESTION

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Nihar hopefully the concept of IRR is now clear to you. If u still have doubt then ask...