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Hello sir.. some times back i asked a question on npv where we had the same net cash inflow for 5 years.. i had used the present value table and calculated each year seperately.. you told me my answer was correct but instead of using the present value table, use the annuity table for the net inflows and for scrap value use the 5th year value on the present value table. While working through the BPP revision kit, i came across a rather similar question where it had the same inflows for 5years and at end, it had a scrap value. I used the annuity table and for scrap value i used the 5th present value. The available solution show that they used the present value table and calculated each year seperately.
I am confused as to which method to use. for the bpp question i got an answer which was slightly different..i think it was 60$ more.. will i be penalised?
It doesn’t matter which way you do it. Where there is an equal cash flow each year then it is quicker to use the annuity tables (and time is one of the biggest problems in the exam).
As I explained in my previous answer, the difference in the NPV is simply due to roundings (the tables are rounded to three decimal places) and you do not lose marks for rounding. (The examiner usually asks for an answer to the nearest thousand $’s in order to make sure that round is not a problem).
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