Doubts

Exercise 2 Review Quiz – Topic 6

Exercise 2 Review Quiz – Topic 6

by Sofia Lampreia Alves Garcia -
Number of replies: 1

Hi Professor,

In Exercise 2 of the Review Quiz – Topic 6, we are asked to calculate the IRR of a project.

The question also says: "Assume the appropriate discount rate for this project is 15%". I’m a bit confused - since IRR is the rate that makes the NPV = 0, do we actually use the 15% in the IRR calculation?

Thanks for the clarification!

Best, 
Sofia

In reply to Sofia Lampreia Alves Garcia

Re: Exercise 2 Review Quiz – Topic 6

by Julio Crego -
Hi Sofia,

No, we do not. In practice, we would need to compare the IRR to the discount rate. If IRR is higher, we implement the project.

Best