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Ramaiah says

Hi can you please explain this question taken from June 2013 exam paper.

A project has an initial outflow of $12000 followed by six equal annual cash inflows, commencing in one years’ time. The payback period is exactly four years . The cost of capital is 12% per year. What is the project’s net present value ( to the nearest $) ?

A. $333

B. $ -2,899

C. $ -3,778

D. $ -5926

The correct answer is option A.

2. An investment project has the following discounted cash flows($’000).

Year Discounted rate

0% 10% 20%

0 (90) (90) (90)

1 30 27.3 25.0

2 30 24.8 29.8

3 30 22.5 17.4

4 30 20.5 14.5

=30 =5.1 = (12.3)

The required rate of return on investment is 10% per annum.

What is the discounted payback period of the investment project?

A. Less than 3.0 years

B. 3.0 years

C. Between 3.0 years and 4.0 years

D. More than 4.0 years

Ramaiah says

The correct answer for 2nd Question is option is C.

John Moffat says

You must ask these questions in the F2 Ask the Tutor Forum, and not as a comment on a lecture.

(And I assume that you have watched the lectures on both interest and investment appraisal?)

The ACCA does not publish past exams for Paper F2, so these cannot be from the June 2013 exam!