However, there is a problem with this method which makes
it difficult to use. It involves a lot of try and error with different
discount rates until you get the one that makes the NPV = 0.
Nevertheless an alternative and easier method exist which is
by interpolation. The actual rate is found by interpolation between
two discount rates that gives small positive and negative
NPVs. The rule of interpolation is given as
Where LDR denotes lower discount rate; HDR denotes
higher discount rate; NPVLDR denotes Net Present value at lower
discount rate; NPVHDR denotes Net Present value at higher
discount rate; D denotes the difference between discount rates.