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Hi, John. I don鈥檛 understand under what circumstances should fixed costs be involved in the calculation? And under what circumstances fixed costs should be ignored in the calculation . Thanks.
When calculating the NPV all incremental costs are included.
As far as calculating the sensitive of individual items, it depends what changes as a result. So if asked for the sensitivity of fixed costs then we calculate the PV of the fixed costs. However if asked for the sensitive of, for example the selling price or the contribution, the fixed costs are not relevant because they will not change if the selling price or the contribution changes.
Hey John, I’m looking for the lecture in which the IRR of a perpetuity is calculated. I remembering you explaining it but cannot find that very lecture. Could you please help me out?
I cannot remember which lecture, but the IRR of a perpetuity is simply the annual cash flow divided by the initial investment expressed as a %.
Thanks John 馃檪
You are welcome 馃檪
How have you calculated the contribution at 2.95 per unit x 15,000?
sorry was on the wrong example
issmmmm: I would really need to see the actual question to be able to answer you properly, and the ACCA has not published this question.
If it was really as you state (in which case I assume is was one of the 2 mark questions) then you would have to do it in the same way as calculating an IRR i.e. try two different tax rates and then approximate between them.
thank you very much sir for your response I will try as per your instruction .
Sir In Exam Sept 2018 there was a question related to sensitive Analysis in which examiner asked which Tax rate will be used which make NPV zero. Can you please explain how to calculate sensitive analysis for a ta rate. looking forward to your help
Thanks in Advance