IRR / Net Present Value

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Hi,

I'm realy strugling here!!

Can anyone explain to me in simple terms the meaning of Internal Rate of Return, it seems to be in all the past papers but I cant explain what it is!!!

Can anyone help me? I seem to be stugling in the written questions.

Any help appreciated.

Thanks

:(

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:IRR / Net Present Value



    If you go th page 2 on the forum you will find alot of information on IRR and Net present value by Sandy Hood Ihope this helps and good luck
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:IRR / Net Present Value

    Hi

    The IRR represents the true discount rate when you work out the NPV. The NPV value is worked out depending on the company's capital %. So when you work out the NPV, it should always be zero or above to make the project worthwhile. The IRR is the maximum cost of capital that can be used without making a loss.

    So if the company uses a IRR of 12% or above and you work out the NPV on 12% and the value comes out negative, the project should not be done as the cost of capital is lower than the project is worth.

    Hope this helps a little bit more - but if you keep reading the answers on the past papers, you'll get the hang of it!

    L x
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:IRR / Net Present Value

    Thanks x

    I'm going to look at Unit 5 now having more difficulties with that!!

    Cant wait to get next week over with although I know I'm not ready for the exams!!

    x :?
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:IRR / Net Present Value

    Hi

    I know what you mean - I learn one bit and then I forget it the next time I do it!!! I have so many things going round in my head, its a nightmare!

    A large drink is in order for Wednesday night!

    GOOD LUCK EVERYONE - You can do it :D

    L x
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:IRR / Net Present Value

    Thanks Good Luck to you aswell

    x
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:IRR / Net Present Value




    You maybe more ready than you think just be positive.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:IRR / Net Present Value

    I wish I was but at the moment I'm struggling with simple things!!! Which side to put opening balances - I should have learnt them last year!!!

    Thanks for oyur encouragement though - hopefully I will be able to learn a bit between now and the exams!

    x :roll:

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