Page 270 - BA2 Integrated Workbook STUDENT 2018

Chapter 14

 From this graph we can estimate the IRR (the point at which the NPV = zero) in
different ways:

1 Reading from the graph

2 Interpolating using proportions

3 Formula method

You can also calculate the IRR using the following formula:

N L
IRR = L + ——— (H – L)
N L – N H

Notice that the IRR estimated from the straight line drawn is
different from the ‘true’ IRR.

Illustrations and further practice

Go over illustration 7

Try TYU 15

264