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When I calculate IRR by interpolation , the answer which I get and in the book is quite different. For example if I get the answer as 12.86% book shows the answer ad 12.42%. I have taken present value factor for any discounting factor up to 3 decimal places. Is this difference due to approximation of PVF? And Upto what difference In IRR rate considered permissible from exam point of view.

Answers (5)

MAHITHA SENTHIL KUMAR

If I take PVF upto 4 decimal places, in book in most of the cases they have considered upto 3 decimal places only. In that case will I still be awarded mark for it. As my answer might slightly differ from book answer due to approximation

In most cases, PV factor would be given in exams. Also the approximation depends on the rate which you choose. the formula which you use for IRR is an approximation tool.