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COST MANAGEMENT ACC

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › COST MANAGEMENT ACC

  • This topic has 6 replies, 2 voices, and was last updated 8 months ago by John Moffat.
Viewing 7 posts - 1 through 7 (of 7 total)
  • Author
    Posts
  • May 8, 2020 at 9:40 am #570302
    Anonymous
    • Topics: 10
    • Replies: 10
    • ☆

    A one- year investment yields a return of 14%. The cash returned from the investment,
    including principal and interest, is 5,130. What is the interest?

    the ans is 630 but i cant find the ans

    May 8, 2020 at 9:41 am #570303
    Anonymous
    • Topics: 10
    • Replies: 10
    • ☆

    this is the discount cash flow topic

    May 8, 2020 at 10:51 am #570312
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 41628
    • ☆☆☆☆☆

    The PV of the cash inflow (and therefore the principal) is 5,130 x (1/1.14) = 4,500.

    Therefore the interest is 5,130 – 4,500 = 630.

    May 8, 2020 at 12:02 pm #570321
    Anonymous
    • Topics: 10
    • Replies: 10
    • ☆

    thank you very much,u help me a lot. 🙂

    May 8, 2020 at 12:08 pm #570322
    Anonymous
    • Topics: 10
    • Replies: 10
    • ☆

    But how to get the 1.14?

    May 8, 2020 at 12:10 pm #570323
    Anonymous
    • Topics: 10
    • Replies: 10
    • ☆

    is it 0.14+1 year?

    May 8, 2020 at 3:42 pm #570338
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 41628
    • ☆☆☆☆☆

    No.

    1/(1+r)^n is the discount factor where r is the interest rate and n is the number of years. You are given the formula at the top of the page of present value factors that you are given in the exam.

    This is all explained in my free lectures. The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.

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