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NPV

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBL Exams › NPV

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by Ken Garrett.
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  • August 20, 2016 at 11:36 am #334188
    diannel2012
    Member
    • Topics: 18
    • Replies: 37
    • ☆☆

    one of the advantages of NPV over other methods such as ARR & Payback is that considers the entire life of the Project and considers cash flow instead of profit.

    My question is: if a scenario give you a period of 5 years to calculate NPV with estimated cash inflow and outflow

    what happens after year 5?- Does that mean that after the 5 years the project seizes to exist??
    is the 5 years the whole life of the project??

    August 21, 2016 at 12:17 pm #334348
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    Yes – if you have no data for years 6 etc, you can’t invent it.

    All NPV calculations make an assumption about when the project ends. Sometimes scrap sales come in then too.

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