initial cost 300,000/
life - 5 years
addition revenue per year - 120,000/
additional cost per year - 30,000/
scrap value - 20,000/
cost of capital - 10%
I got NPV as 53,720/ and IRR as 17%
but I am told answer is NPV - 53610 and IRR - 21
Please assist me. F2 exam is in a few days. I have watched all your lectures, revision and tests.
Ask the Tutor ACCA MA
NPV AND accounting rate of return
9y ago#1For the NPV, the difference is rounding - your answer is OK and rounding is not a problem in the real exam.
For IRR, the question does not ask for the IRR - it asks for the accounting rate of return.
The average profit is (120,000 - 30,000) - depreciation of (300,000 - 20,000)/5 per year = 34,000.
The average investment = (300,000 + 20,000) / 2 = 160,000.
So the ARR = 34,000/160,000 = 21.25%
Topic lockedNew replies are closed.