I already watched but for a long time.I already watched again and I understand.Sorry but can I default understand that sensitivity of initial investment will always positive and sensitivity of sales column/contribution will always negative?If so, why in the Q3, sensitivity of sale column is 5.3%, not -5.3%?Thank you.

No, you cannot understand that. If a reduction in the variable is needed to result in a zero NPV then the sensitivity is negative. If an increase in the variable is needed to result in a zero MPV then the sensitivity is positive,

In the comment belo yos say „ If a reduction in the variable is needed to result in a zero NPV then the sensitivity is negative“. But in the third question, we state that sensitivity is +5.3% even though a reduction of the revenue/contribution is needed to result in a zero NPV. How come? Thanks a lot!

Thank you for your comment (but do make sure that you have a Revision Kit from one of the ACCA approved publishers because they contain lots more questions for practice) 🙂

Why question 1 statement 2 is not correct? The expected net present value is the value expected to occur if an investment project with several possible outcomes is undertaken once.

Yes of course. But if the volume changes then the variable costs will change also. So it is the contribution that will change.

(You really should watch my free lectures on this. Our lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.)

phuongmore says

Dear sir, can sensitivity be negative?If yes, in which case?Thank you.

phuongmore says

Dear sir please check my above question.Thank you

John Moffat says

Yes it can. Watch my lecture working through example 1 of Chapter 10 of the lecture notes.

Did you not watch the lecture before attempting this test?

phuongmore says

I already watched but for a long time.I already watched again and I understand.Sorry but can I default understand that sensitivity of initial investment will always positive and sensitivity of sales column/contribution will always negative?If so, why in the Q3, sensitivity of sale column is 5.3%, not -5.3%?Thank you.

John Moffat says

No, you cannot understand that. If a reduction in the variable is needed to result in a zero NPV then the sensitivity is negative. If an increase in the variable is needed to result in a zero MPV then the sensitivity is positive,

Acastanot says

In the comment belo yos say „ If a reduction in the variable is needed to result in a zero NPV then the sensitivity is negative“. But in the third question, we state that sensitivity is +5.3% even though a reduction of the revenue/contribution is needed to result in a zero NPV. How come? Thanks a lot!

John Moffat says

The choice of answers do not specify whether positive or negative – they are testing just on the % amount.

zakiijaz says

Sir could you please tell me about the minimum acceptable contract price and how to calculate it

John Moffat says

Which of the test questions are you referring to?

yula says

in question, 2. is using the joint probability not valid

John Moffat says

You could certainly use joint probabilities, but it would take a lot longer and the final answer would be the same.

asher2019 says

Thanks for the questions sir. I enjoyed solving them.

John Moffat says

Thank you for your comment (but do make sure that you have a Revision Kit from one of the ACCA approved publishers because they contain lots more questions for practice) 🙂

gabbi08 says

Dear Sir,

Why question 1 statement 2 is not correct?

The expected net present value is the value expected to occur if an investment project with several possible outcomes is undertaken once.

Thanks

John Moffat says

Not at all. The actual NPV depends on the actual returns.

The expected NPV will only occur if the investment is undertaken lots of times – it is the average of all the possible NPV’s.

gabbi08 says

Dear Sir,

True. I have misunderstood the question.

Thanks a lot for your reply

Gabriella

John Moffat says

You are welcome 🙂

acca9 says

For Q 3 if the sales volume change, doesn’t the sales revenue pv change too?

John Moffat says

Yes of course. But if the volume changes then the variable costs will change also.

So it is the contribution that will change.

(You really should watch my free lectures on this. Our lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.)

acca9 says

I have watched the lecture….just got a little confused there. All clear now.

Thanks for a bunch of great lectures-really clear!

John Moffat says

Thank you for the comment 🙂

inarun says

Dear sir, correct me if im wrong, for question no 5, we should get -26%, if the NPV is negative, am I correct? Thank you, sir.

John Moffat says

The NPV will only fall if the initial investment is higher by 26%. So the sensitivity is + 26%