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NPv

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › NPv

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • September 24, 2021 at 6:02 pm #636415
    johnbriane
    Member
    • Topics: 170
    • Replies: 160
    • ☆☆☆

    Kaplan guide states that in times when npv and irr conflict

    Npv should be considered

    But I truly cannot understand what this means and how does it work

    Please help me sir

    September 25, 2021 at 10:50 am #636458
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    There is only a possible conflict when comparing two investments.

    We use NPV because the investment with the highest NPV is giving the biggest surplus.

    Comparing IRR’s will not always give the same result because it is simply comparing the interest rate that gives breakeven (i.e. an NPV of zero).

    It is as well just to be aware of this for Paper MA, but it is only in Paper FM that it actually becomes important.

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