Challenge to ca finalists
K N V S SIVAKUMAR (QUALITY LEAD AT CHEGG INDIA PVT LTD) (964 Points)
29 October 2015
16 Replies
Karthik.V.Kulkarni
(Chartered Accountant)
(594 Points)
Replied 30 October 2015
Option 2 should be chosen.
Miss Rinkal
(Student)
(1309 Points)
Replied 30 October 2015
Ans
a. Without having cash inflow details, how can IRR be calculated??? If yes, please provide the solution.
b. Method B will be chosen because PV of NCO of B is lower than PV of NCO of A. It will save approx Rs. 63330/- in PV terms.
Miss Rinkal
(Student)
(1309 Points)
Replied 30 October 2015
@ Ubaid:
Please provide the solution if you know the answer for pt a. I know that net cash outflow is provided. But you cannot have negative irr as far as I think. It is not that easy as it seems to be.
Miss Rinkal
(Student)
(1309 Points)
Replied 30 October 2015
Okk I might be wrong. I had an opinion that irr cannot be negative (Which already i have mentioned as i think.) But I want the solution for part a. Part b already I answered. And I felt that easy. My opinion was wrt pt a. Do you have answer for pt a, then please provide the solution as I want to know how it is to be solved?
Miss Rinkal
(Student)
(1309 Points)
Replied 30 October 2015
The formula of IRR is [P1/(1+IRR)^1 + P2/(1+IRR)^2 + P3/(1+IRR)^3 + . . . +Pn/(1+IRR)^n] - P0 =0
There will not be any IRR in the given case according to me.
@ Ubaid:
The working that you showed should have 1+r and not 1.r? Correct me if I m wrong
Miss Rinkal
(Student)
(1309 Points)
Replied 30 October 2015
According to me, IRR will not be possible in case of all positive or all negative values.
Experts, correct me if I m wrong?
Miss Rinkal
(Student)
(1309 Points)
Replied 30 October 2015
@ Ubaid:
Ok . I thought u used "." as a multiplication sign. So I clarified. Anyways thanks that you mean the same.
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