Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › NPV-DEC 2008 Q3 b
- This topic has 4 replies, 2 voices, and was last updated 8 years ago by John Moffat.
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- November 26, 2015 at 8:06 am #285357
The answer says ” The investment is financially acceptable, since the NPV>0 . The investment might become financially unacceptable, however however , if the assumptions underlying the forecast financial data were reconsided, for example, the sales forecast appears to assume constant annual demand, which is unlikely in reality. ”
I just wonder the meaning “… were reconsider” in the question. Would you mind explaning to me in detail:)November 26, 2015 at 8:24 am #285365What I am confused is when we occur the unexpected condition like the example mentioned , what result should we do? In my opinion, we should do like this “The investment is financially acceptable, since the NPV is positive . However, the investment might become financially unacceptable, because the assumptions underlying the forecast financial data were reconsided( the sales forecast appears to assume constant annual demand, which is unlikely in reality. )
But I am not sure.November 26, 2015 at 10:03 am #285410Always when we make a decision using NPV, we are making assumptions about what the future cash flows will be.
What you have typed is the same as what the examiner wrote and is fine 🙂
November 26, 2015 at 10:28 am #285419Thanks , in general , when I occur NPV>0, I will always think it is financially acceptable. Obviously, the solution examiner gave is perfect:)
November 26, 2015 at 10:30 am #285421Yes – it is financially acceptable but always state that it is subject to all the estimates of cash flows being correct.
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