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net present value

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › net present value

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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  • Author
    Posts
  • September 17, 2022 at 1:44 pm #666607
    trisha20
    Participant
    • Topics: 1
    • Replies: 0
    • ☆

    if a mistake in estimating the NPV of a project is made. where the net
    income is discounted rather than the cash flows to the project. Would you expect the NPV that you
    have calculated to be higher or lower than the NPV using cash flows? why is there a difference

    September 17, 2022 at 3:29 pm #666617
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54655
    • ☆☆☆☆☆

    The net income is the profit which is after charging depreciation. The NPV is therefore likely to be lower than that had they used the cash flows.

    Why are you asking me this? It is not the sort of thing that is asked in the AFM exam.

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