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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Mar/Jun 2018
Good-day Mr John.
I seem to be confused as to how the last column in Cooper Co (a) was arrived at in the suggested solutions. The column contains the NPV.
I also don’t know how a ii and iii answers were arrived at.
For each of the possible outcome, the NPV is the PV of the year 1 flow plus the PV of the year 2 flow, less the initial investment of 3,500.
For part (ii) to get the probability of the NPV being negative we add up the probabilities of all the outcomes that give a negative NPV, from the table.
The most likely outcome is the one with the highest probability. The highest probably of the various outcomes is 0.30.
Thank you sir.
You are welcome.