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Lost contribution in APV questions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Lost contribution in APV questions

  • This topic has 5 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 6 posts - 1 through 6 (of 6 total)
  • Author
    Posts
  • April 9, 2015 at 1:04 pm #240654
    at800
    Member
    • Topics: 29
    • Replies: 32
    • β˜†β˜†

    Dear Tutor,

    How should we treat the contribution lost due to the project launch.

    Per Q29 of BPP Practice and Revision Kit, the lost contribution is included to the base NPV (i.e. the all equity NPV).

    Per Q79 of BPP Practice and Revision Kit, the lost exports are considerred as a side effect.

    I’m sure there is a reason.

    Please clarify how should we deal with this.

    Are there are any general rules to apply?

    General people like general rules πŸ™‚

    Thank you in advance.

    April 10, 2015 at 6:15 pm #240793
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51583
    • β˜†β˜†β˜†β˜†β˜†

    I am really sorry, but I do not have the latest edition of the BPP Revision Kit.

    If you give me the names of the questions then I should be able to find them and then I will try and help you.

    April 13, 2015 at 8:24 am #241081
    at800
    Member
    • Topics: 29
    • Replies: 32
    • β˜†β˜†

    No problem:
    Q29 – “Neptune” – from June 2008 – amended;
    Q79 marked as “Intergrand (SFM, 12/02, amended);

    April 14, 2015 at 6:30 am #241212
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51583
    • β˜†β˜†β˜†β˜†β˜†

    With APV you discount the cash flows as though all equity finance, and separately add on the benefit of the tax shield on the debt.

    In both questions, the tax shield has been dealt with in the same way.

    The reason that the lost exports are dealt with separately in Integrand is nothing in itself to do with APV. It is because they are in $’s whereas the other flows are in Euros and so need converting separately.

    April 14, 2015 at 8:00 am #241242
    at800
    Member
    • Topics: 29
    • Replies: 32
    • β˜†β˜†

    Thank you very much!

    April 14, 2015 at 9:58 am #241261
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51583
    • β˜†β˜†β˜†β˜†β˜†

    You are welcome πŸ™‚

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