i* values by hand If hand solution is chosen, the same procedure used in Example 7.2
can be applied here. However, the technique to estimate the initial i value will not work
as well in this case since the majority of the cash flows do not fi t either the PF or the
FP factor. In fact, using the PF factor, the initial i value is indicated to be 1.25%.
Trial-and-error solution of Equation [7.7] with various i values will approximate the
correct answer of about 4.5% per year. This complies with the test results of one positive
i* value.
i* by spreadsheet function Use the IRR (B3:B13,guess) function to determine the i*
value for the NCF series in column B, Figure 7–6. Entering different values in the
optional “guess” field will force the function to find multiple i* values, if they exist.
As shown in row 17, two are found.