IRR! Help Needed.

deborah

Please can anyone help? How do i calulate IRR?

:crying:

SandyHood

1. IRR only appears in the AAT in unit 6
2. The syllabus is clear, the exam will not ask you to calculate it
3. Finding the precise IRR of an investment project is difficlt without a spreadsheet
4. An approximation is asked for in CIMA and ACCA exams, this is found by interpolation
5. First find the NPV of an investment project
6. If this was a positive value, then increase the discount rate until you find anothe NPV which is negative
7. You then know that the IRR is greater than the discount rate for the +ve NPV but less than the discount rate at the -ve NPV
8. Take the lower rate + (the +ve NPV divided by the difference between the 2 NPV values x the difference between the 2 rates.

For example Deborah project has a +ve NPV of £300 at 10% and a -ve NPV of £180 at 13%

So 10% + ((300/480) x 3%) = 11.875%