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Sir,
I failed the FM exam in December 2018. I got only 40 marks for the exam and this was my first attempt. Now I am planning to do the exam again in March 2019. I downloaded the FM notes and I have the KAPLAN revision kit. Will it be enough if I study the notes and practice the revision kit questions?There is no point in using our lecture notes unless you also watch the free lectures that go with them. Our notes are lecture notes and it is in the lectures that I explain and expand on the notes.
If you are not watching the lectures then you need to buy a Study Text from one of the ACCA approved publishers and study from there.If you are watching the lectures, then the only extra book you need is a Revision Kit because practice as past exam questions is vital.
A company is considering a two year project which has two annual IRRs namely 10% and 25%.The sum of the undiscounted cashflows is positive.
The project will necessarily have a positive NPV,when the annual cost of capital is,
A more than 25%
B more than 10%
C between 10% and 25%
D less than 25%How to answer this question?How to think about this question?
Please do not post the same question twice in two different places (and please start a new thread when it is a different question – this has nothing to do with the heading of this thread 🙂 )
You will know from my free lectures, that the graph of the NPV against the rate of interest will be a curve that crosses the axis (i.e. NPV zero) in two places, at 10% and at 25%.
Because he sum of the undercounted flows is positive, it means that the NPV is positive at interest of 0%.
So what is happening is that at 0% the NPV is positive, as the interest rate increases the NPV will get lower until at 10% it is zero. It will carry on getting lower (and therefore a negative NPV) but then start increasing until at 25% it is again zero. It will then carry on increasing and so there will be a positive NPV.Therefore for interest of less than 10%, the NPV will be positive. For interest of between 10% and 25%, the NPV will be negative. For interest above 25%, the NPV will be positive.
Sorry for the inconvenience caused. I will use a new thread next time.
Thank you Sir for the explanation, now I understand how to get the answer.
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