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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › March/June 2016 (past year paper)
question 4a)
how can i calculate the current price for the option to expand?
I am assuming that you are asking about the figure of $10.68M in the examiners answer.
The question says that the expenditure will be $15 in 3 years time, so the PV of this is $15M x 3 year d.f. @ 12% = $10.68M (and the NPV at this current value would therefore be $0 as per the question).
