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Please help i am trying work out how the PV for 2010 came to £179516. Shouldn’t it just be £141840 x 12.5% or the figure from the present value table for 12% for 3 years. both dont come to the answer.
Your help would be much appreciated.
Airam
2012 was used as current year therefore 2010 is two years ago.
The discount factor is therefore 1.125^2 (raised to the power of 2.
1.125^2 x 141840 is 179516“John is naïve and wants the NPV and MIRR to be appraised as if the business was a three-year project up to 2012 so he knows the performance of the business to date. He has requested that other calculations in your performance review should be annual based on the 2012 figures although he is aware that this may be omitting in his words ‘some important detail’” [/u]
I still don’t understand this…how are we suppose to know 2012 is to be taken as current year and NPV is not calculated normally?:(
abidfatima5;
There are two clues in the question.
1.fifth paragraph 1st sentence mentions that the business has been going for 3 years hence why data only goes back to 2010.
2. fifth paragraph again line 5 mentions he has included next years forecast for this implies that we must be in 2012.
Hope this makes sense.
Airam
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The examiner has given clues. The problem is we have not solved NPV in this way so we did not pick the clues.. That is our problem.. I also did not pick the clues…. so giving this time again..
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