- This topic has 1 reply, 2 voices, and was last updated 7 years ago by John Moffat.
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- February 25, 2017 at 12:41 am #374077
Apologies for coping and pasting the question below from another question and answer. You said the difference to the below was due to rounding in the table. But I’ve used the figures from the table you provided in the notes. Why am I getting 53520. I’m worried I will get this wrong in the exam due to rounding.
In the mock exam there is a question to calculate the NPV, however this question includes inflows and outflows in every year. I took the net (Inflow less outflow) p.a and calculated that based on the NPV table in every year.
I have done the question several times but my answer is always incorrect (I have NPV of +$53,520) the answer when I review is +$53,610 – This is a small difference and I wonder if the NPV table with only 3 decimals could cause this?The question is as follows:
Initial investment $300,000
Inflow per annum $120,000
Outflow (Incremental cost) per annum $30,000
Scrap value $20,000February 25, 2017 at 10:51 am #374121There will not be a problem with this in the exam.
The examiner is aware of the possible rounding problems and so will ask (for example) for the NPV to the nearest thousand – so as to avoid the problem 🙂
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