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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 1 year ago by John Moffat.
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  • Author
    Posts
  • October 2, 2021 at 9:58 am #636860
    johnbriane
    Member
    • Topics: 170
    • Replies: 160
    • ☆☆☆

    The details of an investment project are as follows:
    Cost of asset bought at the start of the project $80,000
    Annual cash inflow $25,000
    Cost of capital 5% each year
    Life of the project 8 years
    The present value of the cash flows that occur in the second year
    of the project is:

    dear sir this a question from kaplan text which was required to find the present value
    but i wanted to know that if the question had stated to calculate the net present value of the question then

    is this correct?

    year cash in/out d/f present value
    0 -80000 1 -80000
    1 25000 0.952
    8 25000 6.463
    year 2-8 25000 5.511 137775
    npv +57775

    October 2, 2021 at 3:48 pm #636871
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51559
    • ☆☆☆☆☆

    The cash inflows are from1 to 8 (not 2 to 8) and so the PV of the inflows would be simply 25,000 x 6.463.

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