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Hi
Just confused with this, OK I understand how we get to $48.85m as at 31/10/14, but then it says Cash Inflow changes to $76m (from $80m) as at 31/1/15 for the 3 months to 30/4/15? so after discounting shouldnt the figure be less than the $48.85m? instead of a gain to $54.9m?Also in the answer have they used the correct discounting rate to arrive at $54.9m? this is supposed to be Period 2 (so should be 0.961) but it looks like they have discounted at Period 1 rate (0.980)??
Would be great if someone could explain this, I just dont get it :o(
Very hard to interpret the answer. My only consolation is that as the maze keeps growing and is sold as a profit we have to keep showing gains!
The valuation at 31st of January is only taking into account future cash flows in the following three months and that is why they have only discounted those cash flows for one period. I can just about accept the logic that when you measure something at an NRV or similar you need to look at the future selling price less the future costs
As always when the question came up most candidates would have been at sea. Credit would be given if you showed some indication of discounting and some appreciation of the rules.
Please don’t forget that this was an old syllabus question. You should be focusing mainly on new syllabus questions in view of the change in exam style
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