• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

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

DCF technique

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › DCF technique

  • This topic has 3 replies, 2 voices, and was last updated 12 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • November 16, 2012 at 11:33 am #55354
    nomantufail
    Member
    • Topics: 17
    • Replies: 13
    • ☆

    I have a question on discounted cash flow.
    Data for the production of a product.
    Year 1 Feasibilty costs 10,000
    Year 2 capital expenditure 1 million
    Year 4 to year 10 net cash inflow of 40,000
    Launch date of product is at the beginning of year 4 and expected number of products will be 6,000 each year
    Required : calculate cost per product using DCF technique.

    My question is that which point we should take as origin for calculations.(origin here i mean the year which should be deemed year 0)

    Whether it should be beginning of year 4(the date of launch of product). So that we should compound the year 1 and year 2 costs to year 4. And discount cashflows after 4 to year 4.

    Or whether it should be year 0 where we will discount all cashflows to year 0

    Or whether it should be at year 2. The year of capital expenditure.

    Please guide and save my life

    Thanks and regards
    Noman Tufail

    November 17, 2012 at 8:59 pm #107572
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    I am a bit puzzled how you are supposed to calculate the cost per unit – it is impossible on the information you have given.

    However, if will not make any difference when you let be time 0 (although it should normally be the date of the first flow).
    The NPV itself will be different depending on the time period (although it would be the same sign (+’ve or -‘ve) whichever date you used for time 0.

    For calculating the cost per unit (assuming there was more information in the question) then the date of time 0 will make no difference at all.

    November 17, 2012 at 9:11 pm #107573
    nomantufail
    Member
    • Topics: 17
    • Replies: 13
    • ☆

    I understood sir. Bundle of thanks. You saved my life.

    November 17, 2012 at 9:34 pm #107574
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • julio99 on Impairments – Impairment (CGU) – ACCA Financial Reporting (FR)
  • effy.sithole@gmail.com on EPS – diluted EPS Example – ACCA Financial Reporting (FR)
  • Ken Garrett on The Finance Function in the Digital Age – CIMA E1
  • DeborahProspect on ACCA SBR Specimen Exam 2 Question 1
  • darshan.69 on Chapter 9 Pension Schemes TX-UK FA2023

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in