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Hathaway March 2020

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Hathaway March 2020

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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  • December 26, 2022 at 3:04 pm #675110
    aliy
    Participant
    • Topics: 4
    • Replies: 2
    • ☆

    Hello sir,

    For the part a ii and iii) of this question, when calculating NPV, why do we need to deduct the $10.72 from the expected Npv calculation?

    I thought that we had to add the 10.72 (pv of year 1) to the NPV of years 2 to 5..

    Can you please explain sir?

    December 28, 2022 at 10:03 am #675146
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    10.72 is the PV of the initial investment and is therefore negative and is subtracted from the PV of the later inflows.

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