Homework Answers
Using Hit and trial method implied interest rates can be calculated
Present value for the interest rates calculation using estimated rates @10% and 12%
| Year | Particulars | Amount | pvf @10% | Present Value @10% | pvf @ | Present value @ |
| 0 | Cash Outflow | 173423 | 1 | (173423) | 1 | (173423) |
| 1-7 | Cash inflow | 38000 | 4.86842 | 185000 | 4.56376 | 173423 |
| Net Present Value | 11577 | 0 |
So in case of 12% npv is zero hence IMPLIED INTEREST RATE is @12% per annum.
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