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Dear Tutor,
In exams, how do we know what/when assumptions are to be made?
Thanks.
At P4, it is up to you to make sensible assumptions if and when needed. There is no rule.
(For example, if you are doing investment appraisal with tax, then you need to know when the tax is payable. If the question tells you then no problem – you do what you are told. If the question does not tell you then you are forced to make an assumption – state your assumption, and provided it is sensible you will get full marks.)
hi sir
i just wanted to know in order to get the marks for the assumptions im making , do i have to state the “reason” for the assumptions like they do in the model answers.
for example,(tramont co) – the borrowing rate of 5% has been used to calculate the PV of the tax shield benefits. the Rf rate of 3% could have been used instead but it felt more prudent to use the 5% rate.
here if it were me i wouldve just wrote, the borrowing rate of 5% has been used to calculate the PV of the tax shield benefits.
i dont know if this is making sense to you . 🙂
thanks
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