September 2025 ACCA Exam results

Post comments & Instant poll

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for December 2025 exams.
Get your discount code >>

Sept/Dec 2016 Sensitivity of selling price

This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.

Viewing 2 posts - 1 through 2 (of 2 total)

Author
Posts
December 4, 2018 at 12:33 am #487091
jayped
Member
- Topics: 10
- Replies: 8
Hi John,
Section B question 2 (b) of the Sep/Dec 2016 paper asks to calculate the % change in the selling price required for the investment to have a zero NPV…
Can you please tell me why our discounted revenue cash flows are multiplied by 0.75? Are we calculating the after-tax revenue cash flows then discounting?
Thanks.
December 4, 2018 at 7:31 am #487122
John Moffat
Keymaster
- Topics: 57
- Replies: 54761
Yes. For every $1 change in the revenue, the profit will change by $1 and therefore the tax will change by $1 x 0.25. So the net effect is a change of $1 = 0.25x$1 = $1 x 0.75
Author
Posts

Viewing 2 posts - 1 through 2 (of 2 total)

You must be logged in to reply to this topic.