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June 2010 Question 1 (iii) – please help

This topic has 1 reply, 2 voices, and was last updated 14 years ago by vikjojo.

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October 25, 2010 at 1:46 pm #45687
rachellai
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Want to the check how the examiner derived the answer below as in the answer scripts:-
Construction Cost
Cost increase per $100m x (3 x 0.9091 + 6 x 0.8264 + 1 x 0.7513) = $ 122.1m
I get 82.81. Is it typo error or i get wrongly? Please enlighten.
November 30, 2010 at 12:23 pm #69778
vikjojo
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What it is saying is that the discounted cashflows from 2012 (300 x 0.9091), 2013 (600 x 0.8264) and 2014 (100 x 0.7513) gives a NPV of $122.1m. So cashflows of 84.37 = NPV of 122.1
How much have these cashflows got to change before the NPV = 0
Hope this helps
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