ACCA F2 / FIA FMA lectures Download ACCA F2 notes
ACCA F2 Investment appraisal – Payback period
Reader Interactions
Comments
Leave a Reply
You must be logged in to post a comment.
Free ACCA & CIMA online courses from OpenTuition
Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams
20% off ACCA & CIMA Books
OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>
Thanku so much sir… your lectures really helped….
Thank you for your comment – I am pleased you find them helpful 🙂
Thank you Open Tuition , this lecturer is a great one and has helped me a lot in the F2 Paper.
Thank you for your comment 🙂
I really enjoyed the lectures apart from the (IRR ).The internal Rate of Return was not cleared to me i must confess honestly.
IRR is the hardest to grasp, but do watch again – once you have got it then you will never forget it 🙂
Spreadsheets lectures?
Not at present. Most students are already used to spreadsheets (if you are not then download one – there are many free ones available on the internet) and have a play.
Any questions in the exam are only very simple use of spreadsheets with no advanced features.
before this video i was totally lost. great teaching thanks
Thank you – I am pleased that it helped you 🙂
Hi I’m Chong here, i wish to ask about irr calculation in Q2. Why no need to add in the scrap value in year 4? since it is like a comparison from Q1.
I assume you are asking about the test questions at the end of the chapter.
If you are, then the scrap value is in both answers. The answer to Q 1 shows the two flows at time 4 separately (50,000 and 20,000) the answer to Q2 should the two together (70,000).
It makes no difference at all!
Oh! I see. TQVM. This is my mistake. Now I got it.
Tq john . Now i get the clear pic about this topic ! Your lecture notes is very useful !
in this chapter we can understand the time value of money, the payback period and the internal rate of return and thank you so much of the lecturer in this chapter F2.
hai john im syahirah from malaysia .My questions is about the high low method .
last few day before enter into my exam , when i’m doing my revision , there has a question that confusing me .
says : total cost : $135,000 $ 170,000
Activity level : 16,000 22,000
Variable costs p/u is constant within this range of activity but there is a step up of $5,000 in the total fixed cost when the activity level exceeds 17500 units .
Q:what is the total cost at an activity level of 20,000 units ?
my calculation is i will :$170k – $5k -$135k = $30k
: 22k units – 16k units = 6k
Variable cost : $5 p/u
Fixed cost : $165k – ($5k x 16k)
= $85,000
thus : y = a + bx $85,000 + (20k x $5 ) = $185,000
but my answer is wrong and the correct answer was $160,000 .
can you please explain to me further why my calculation on fixed cost wrong ?
actually ,which cost that i should take either after minus up the step-up cost of $5,000 ($165,000) or including the step-up cost ($170,000) ?
thanks sir . =)
You calculation of the fixed cost is wrong. It should be 135000 – (16000 x 5) = 55000
Having got the variable cost as $5, the quickest way to get the answer is just to say that the only difference between the total cost at 22000 and at 20000 is the variable cost if the extra 2000 units.
So the total cost will be 170000 – (2000 x 5)
PS this page is for comments on the lecture on payback period.
In future please ask questions like this in the F2 Ask ACCA Tutor forum.
hi ,
if question asked : The company is aware that fixed costs INCREASE by $500 when sales exceed 200 units.
Why the answers no needs to add back $500 in the fixed costs ?
Your quickest way to use whether use for the questions when asked step up costs only and needs to add back that set up costs in the fixed costs ?
And the quickest way only use have step up costs ? thanks
In case the initial cash outflow is not recovered over the life of the project which has some scrap value, then should we consider the cash inflow from scrap in our calculation for payback period
Yes – the scrap proceeds should be considered.
Hello John, i have a question after watching this lecture and practicing i was doing the test given in the notes on page 119 the question 2 requires IRR which can be calculated only if there are two percentages given, in the answers given at the end it says you did it with 20% where did u get that 20% please help ……
You can make any two guesses to calculate the IRR.
ohh ok should it be higher than the rate given ?
If the rate given gives a positive NPV then your guess should be a higher rate. If it gives a negative NPV then your guess should be a lower rate.
Ok thank u i did not knew that that is very helpful information =)
our present value is 100000 so why do we need to find the present value of each and every year
The present value is not 100,000!
100,000 is the initial cost of the project.
We calculate the present value of each year so that we can calculate how many years it takes to get back 100,000 (for the discounted payback period).
I cant get the question 2 in test for this chapter, please help. How i supposed to know what percentage i need to work out to compare it with 12% and NPV 33830.
Also Im getting 3.34 in question 4 which is C and not D as its on the back.
Many thanks in advance
Please help i only have 7 days left to exam
You can use any percentage as the second guess. The IRR will be slightly different because the relationship is not linear, but it will be the same to the nearest %.
The answer to question 4 is D. ‘Within’ means less than. 3.34 is not less than 3 years.
I understand now for question 4 but then for question 3 should it be answer D as well?
No.
By the end of three years, the total cash received is 330,000.
The payback period is the time to get back the initial investment of 270,000 and so this is going to be less that (or within) 3 years.
how did you get 0.909 ?
From the discount tables. It is the one year discount factor at 10%.
(Have you watched the previous lecture on investment appraisal – part A ?)
THANK YOU LOAAADS!!!!!
great great great explanation OT……THUMBS WAY WAY UP!!!!