09-07-2005, 05:21 PM
IRR is the best example of this.
IRR is the rate at which NPV is zero, and you have to estiamte the rate at which the NPV becomes Zero.
follow the following formula
"r1 + NPV1/NPV1-NPV2 * (r2-r1)"
Where r1= interest rate at which NPV is positive
r2= interest rate at which NPV is negative
NPV1= Positive NPV
NPV2= Negative NPV
IRR is the rate at which NPV is zero, and you have to estiamte the rate at which the NPV becomes Zero.
follow the following formula
"r1 + NPV1/NPV1-NPV2 * (r2-r1)"
Where r1= interest rate at which NPV is positive
r2= interest rate at which NPV is negative
NPV1= Positive NPV
NPV2= Negative NPV