Hi Mike. I just took the ACCA F2 Mock exam, and I got Section B; Question 1b wrong. Please can u help me out. It says the ARR (IRR) is 21%. But i am getting 17%.
Please help me. How does 21% come about.
The way i tried to solve it was i had to find another NPV; this time 20% which gave me -22,770. Then i plugged them into the IRR formula which gave me 17%
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F2 Opentuittion Mock exam
11y ago#1Mike does not teach Paper F2 !!
ARR is not the same thing as IRR.
The net cash receipt each year is 90,000
The average depreciation each year is (300,000 - 20,000) / 5 = 56,000
Therefore average profit = 34,000 per year.
The average investment = (300,000 + 20,000) / 2 = 160,000
ARR = 34,000 / 160,000 = 21.25%
The free lectures on investment appraisal will help you.
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