• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for September 2025 exams.
Get your discount code >>

investment appraisal

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › investment appraisal

  • This topic has 3 replies, 2 voices, and was last updated 11 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • February 16, 2014 at 3:31 pm #158989
    maan87
    Member
    • Topics: 119
    • Replies: 155
    • ☆☆☆

    Hi john sir, I read this question on the forum and become worried about this topic.
    i read also your reply but i could not understand that what amount will be considered as ‘x’. can you help me on this?

    Brackenwood Plc is a tree felling company that needs to replace a major item of capital equipment in 3 years time. The estimated replacement cost will be $500,000. Funds for the replacement are to be provided by setting aside 4 equal annual sums and investing them at 10% pa. The first amount will be invested immediately, the last in 3 years time.

    What is the annual amount that Brackenwood should set aside?

    The correct answer is – $107,686.

    February 16, 2014 at 4:16 pm #158999
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    The present value of the annual amount has to be the same as the present value of the estimated replacement cost.

    The PV of the replacement cost is 500,000 x 0.751 (3 year discount factor at 10%)

    If the annual amount is X, then it is X immediately (so discount factor of 1) and then X p.a. fir years 1 to 3 – annuity discount factor for 3 years is 2.487.
    So PV of all the annual amounts is X x (1 + 2.487) = 3.487 X

    If you make 3.487 X equal to 500,000 x 0.751 then you can calculate X and you have your answer 🙂

    February 17, 2014 at 5:05 pm #159129
    maan87
    Member
    • Topics: 119
    • Replies: 155
    • ☆☆☆

    hi john sir, thanx thanx thanx alot. i got it. so kind of you. God bless you. i want to be a teacher like u.

    February 17, 2014 at 5:27 pm #159132
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • John Moffat on Discounted Cash Flow Further Aspects, Replacement – ACCA Financial Management (FM)
  • o1lim on Discounted Cash Flow Further Aspects, Replacement – ACCA Financial Management (FM)
  • julio99 on Impairments – Impairment (CGU) – ACCA Financial Reporting (FR)
  • effy.sithole@gmail.com on EPS – diluted EPS Example – ACCA Financial Reporting (FR)
  • Ken Garrett on The Finance Function in the Digital Age – CIMA E1

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in