ENPV - Probability Q32 (a) (i) March/June 2018

GGraham5y ago

Hi John Apologies for the barrage of emails! In the above question, the solution answer shows a table and I can figure out all the columns aside from the last column where they show the NPV. I really can't figure out how this is calculated. Some of them are negative and some are positive. A similar example is also in the Kaplan revision kit and again I can't for the life of me figure how they calculated the NPV value - (last column). Please help! Thanks Graham

John MoffatTutor5y ago#1

If you look at the first line of the tables, the total PV of the 2 years cash inflows is 2,487. The initial investment (applicable to all of the possible outcomes) is given in the question as 3,500. Therefore the NPV for the first row is 2,487 - 3,500 = (1,013). It is the same approach for all of the rows :-)

GGraham5y ago#2

Thanks John, I knew it would be something so simple! Graham

John MoffatTutor5y ago#3

You are welcome :-)

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