I was under the impression that the goalseek function is to be avoided in the modelling for CA2, but came across the banana model. Would it be possible to solve for IRR without the goalseeking function?
I'm not sure about the UK exam but we were suggested to use goal seek in an Indian CA2 exam when I wrote it. Documentation for it could prove tricky so you will need to be careful. There is an IRR function from excel 2007 onward BTW.
Thanks for your feedback, I know there is IRR funciton, I just could not figure out how to use it in this particular example, but I will keep trying. I would be keen to get a confirmation from the Act Ed Tutor about the goal seek function. Isn't a standard IRR excel function preferable over a goalseek function? Why isn't the model solution using IRR instead of goalseek???
Personally - and I haven't sat CA2, so take this how you will - I have little faith in many of Excel's internal functions, IRR being one of them. I would personally rather see a set of cashflows laid out showing that the given rate is the solution to the IRR, and as long as the documentation is adequate, including mention of alternative root solutions, this to me would be ideal.
I sat CA2 recently and as far as I remember the ActEd notes state that goal seek may be used but it needs to be documented carefully in the audit trail i.e. make sure it is clear what cell is changing and what the target cell is and ideally include a check within the spreadsheet to ensure that the goal seek has been run correctly and make it clear to a user if it needs to be rerun. From speaking with colleagues and fellow students this seems to be standard practice in CA2.
