Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Expected values question on npv
- This topic has 3 replies, 2 voices, and was last updated 9 years ago by John Moffat.
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- October 4, 2015 at 3:59 pm #274929
Hi John, page 61 the question states that the fixed overheads ‘increase by 140000 per year’ should it read ‘are 140000 per year’? The solution has 140000 each year as the fixed overheads. Maybe I am reading it /understanding it incorrectly?
Hugh
October 4, 2015 at 5:51 pm #274942Ahhh…..this wording caused a big problem for people in a few real exam questions.
Think of it this way:
Suppose you are currently paid 10,000 a year.
Suppose your manager calls you in and says that your salary will be increased by 1,000 per year.
Surely you will then expect to be paid 11,000 every year?
(You may hope that in future it will be increased again, but you won’t assume that it will be 11,000 next year, 12,000 the year after, then 13,000, and so on.)If the overheads were going to increase by 140,000 every year, then the question would say ‘the fixed overheads increase by 140,000 every year’.
The last time this wording appeared in the real exam, the examiner did say in his comments that people who assumed it increased every year would still get full marks. So he obviously realised afterwards that the English had caused a problem. Because of that I am sure he will make it much more clear next time he sets a similar questions.
October 4, 2015 at 6:50 pm #274946Phew cheers 🙂
October 5, 2015 at 7:29 am #274982You are welcome 🙂
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