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Sept/Dec 2016, Q2(a)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Sept/Dec 2016, Q2(a)

  • This topic has 4 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • June 1, 2018 at 6:21 am #455214
    tasnuva
    Member
    • Topics: 24
    • Replies: 15
    • ☆

    Marketing expenditure is a one time expense. Why are we using it while calculating NPV? I thought we don’t include such expenditures

    June 1, 2018 at 6:23 am #455216
    tasnuva
    Member
    • Topics: 24
    • Replies: 15
    • ☆

    Ok I got it. The question said that it’s a tax allowable expense hence we included it. My question is had the question not mentioned of any such thing, would we have excluded this expenditure?

    June 1, 2018 at 4:47 pm #455298
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    It is nothing to do with the fact that it is tax allowable!!

    We include all future cash flows (including marketing) – the question says that the expenditure is incurred after the launch of the Milland and therefore it is included, just as we include all cash flows.

    June 1, 2018 at 6:31 pm #455342
    tasnuva
    Member
    • Topics: 24
    • Replies: 15
    • ☆

    Oh I thought it’s a sunk cost. Thank you

    June 1, 2018 at 6:34 pm #455346
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    No – it is only a sunk cost if it had already been spent, which is not the case here 🙂

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Viewing 5 posts - 1 through 5 (of 5 total)
  • The topic ‘Sept/Dec 2016, Q2(a)’ is closed to new replies.

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