Calculate two NPVs for the project at two different costs of capital. One NPV must be negative,
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Question:
Calculate two NPVs for the project at two different costs of capital. One NPV must be negative, and another one is positive.
2. Using the following formula to find the IRR:
IRR = L +
where:
L = Lower rate of interest
H = Higher rate of interest
NL = NPV at lower rate of interest
NH = NPV at higher rate of interest
The diagram below shows the IRR as estimated by the formula.
Related Book For
Financial Accounting and Reporting a Global Perspective
ISBN: 978-1408076866
4th edition
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
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