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I’m doing the P4 past year papers and in the Sample September/December 2016 Question 2, part b asks for the % change in selling price required for the investment to have zero NPV. The answer provided writes that to find the change, the NPV is to be divided by the discounted Sales Revenue figures. I do not understand why this step provides the % change in price, I need help please
This is the normal calculation of sensitivity (which is effectively what was being asked for).
You divide the NPV by the present value of the flows that will change.
You can find a full explanation, with examples, in my free Paper F9 lectures on investment appraisal under uncertainty (because this is revision of F9).
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