not able to get IRR concept properly.for ipcc...!
can anybody spend just 10 to 15 min to explain me..!!!
thanxs...in advance....!!!!!
6 Replies
CA ADITYA ZANTYE
(BCOM CA CS PROFESSIONAL)
(325 Points)
Replied 25 April 2011
(Guest)
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 .
(Guest)
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%
Nihar
(IPCC)
(566 Points)
Replied 26 April 2011
CS LLB Pulkit Gupta
(https://www.facebook.com/pages/Life-and-Promises/553962034682487)
(16631 Points)
Replied 27 April 2011
Nihar hopefully the concept of IRR is now clear to you. If u still have doubt then ask...
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