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Dear Mr. Moffat,
I have been going through the answer in Kaplan to Mashi Co question and what remained not clear to me:
In the NPV calculation they didn’t move the periods to one period in the future even though if I read the exhibits seems they say period 0 is an end of period 1?
Thank you in advance.
I do not have the Kaplan books (only the BPP Revision Kit). However I do have copies of all past exam questions and answers, so tell me which exam the question was in (assuming it was a past exam question) and then I should be able to help you.
(I am away from home at the moment and so will not be able to access the question until I get home tomorrow night 🙂 )
Thank you Mr Moffat for the extra effort trying to identify the question.
I actually did an error in the name of the question – it is Washi Co from September 18 (A).
Thank you.
Although it is a little unusual, the question specifically asks for the NPV at the end of the first year (time 0) and says that the cash flows in the question are based on using the end of year 1 as being time 0. There is therefore no need to change the timing of the flows.
Thank you Mr Moffat,
having English as not a mother tongue sometimes I find it difficult to distinguish these things they want int he question… I wonder if it is a solution to calculate both then to eran the marks? PV at the end of the first year and next to it discount it to now just in case? Would it earn the full marks?
The same way I am struggling to understand the issue costs – when the are included into the debt raised and when thex want me to gross up…
Following up on this question with periods- I am really struggling to understand what the examiner wants…
I have just attempted Okan Co (Sep/Dec 19) and the same issue – why do they mention that the project starts in 6 months?? I have adjusted everysthing to 6 months – NPV and inflation of revenues and costs… but no, the examiner doesn’t ant it..
Could you please help me with the possible options – how do they formulate it when thex EXPECT me to adjust to start not in period 0 and when they DON’T expect me to adjust even if they mention that the project starts not in perios 0 but later?
Thank you Sir!
Okan is following exactly the same idea.
The question asks for the NPV’s in six months time and all the figures given in the question are said to be in six months time as well. So nothing needs adjusting for six months – the figures are as given in the question.
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