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OAP Co June 2014( capital rationing)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › OAP Co June 2014( capital rationing)

  • This topic has 4 replies, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • November 27, 2015 at 10:39 pm #285820
    atif2017
    Member
    • Topics: 7
    • Replies: 9
    • ☆

    Sir John.
    This qustn is related to past paper.
    I’m little bit confused to calculate the profitability index.
    I am calculate by this formula
    npv/initial investment.
    Data:
    Projects Initial investment NPV
    ($000) ($000)
    A. 2500 1000
    B. 2200 1550
    C. 2600 1350
    D. 1900. 1500
    E 5000. 0

    My ans for project A is 1000/2500=0.4
    But examiner ans is 1.4, which ans is correct??

    November 27, 2015 at 10:50 pm #285821
    atif2017
    Member
    • Topics: 7
    • Replies: 9
    • ☆

    I cant understand the examiner ans for all projects plz guide me how I calculate the PI for all projects

    November 28, 2015 at 8:26 am #285851
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54761
    • ☆☆☆☆☆

    The profitability index can be stated either way – sometimes the examiner does it one way and sometimes the other.
    You can either have NPV/investment or PV of inflows/investment (the second way will always give the same as the first way plus 1; e.g. 0.4 + 1 = 1.4)

    The ranking and therefore the final answer will be the same whichever way you write it.

    November 28, 2015 at 10:27 am #285880
    atif2017
    Member
    • Topics: 7
    • Replies: 9
    • ☆

    Thanku sir john..

    November 28, 2015 at 11:50 am #285894
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54761
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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