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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Exam Jun 2018 Negative NPV
Hello Mr John
Thank you for the great support
The following question from June 2018 Question 32 (a) (ii)
(ii) Calculate the probability of the investment having a negative NPV; (1 mark)
(ii) Negative NPV probability 24% Sum of joint probabilities with negative NPVs
How did we reach to 24%?
many thanks
If you look at the various possible combinations that result in a negative NPV, you will find there are three of them.
(1013) which has a probability of 0.03
(216) which has a probability of 0.06
and, (120) which has a probability of 0.15
(all the other combinations end up with a positive NPV).
So the probability of ending up with a negative NPV is 0.03 + 0.06 + 0.15 = 0.24 (or 24%)
Thanks a lot ! Really appreciate your support!
You are welcome 🙂