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There is a test question in the MA mock of Able Ltd to find out the NPV and the correct answer should be 53610. I have tried to work it out several times and I am getting an answer of 53520. Can someone please explain to me how this question needs to be worked out as I am losing marks on such questions.
Regards
DanielI assume that you are referring to the mock exam on our website. In which case you can find an answer to your question here: https://opentuition.com/topic/npv-arr-and-payback-period/
The reason that your answer is different is probably that you discounted each flow separately rather than make use of annuity factors. As I explain in my free lectures, the answer will be slightly different if you discount each years flow separately (because the factors are rounded to 3 decimal places in the tables). However that would still get full marks – in the real exam you would be asked for the answer to the nearest thousand to avoid the problem. (But still better to use annuity factors where possible simply because it saves time, and the time pressure is one of the biggest problems in the exam.)
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