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Past exam papers

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Past exam papers

  • This topic has 1 reply, 2 voices, and was last updated 13 years ago by John Moffat.
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    Posts
  • November 7, 2011 at 6:10 pm #50371
    Pudge
    Member
    • Topics: 2
    • Replies: 10
    • ☆

    Hi,
    I was going through past exam papers and had a query regarding Dec 06 Hendil part b – calculate the NPV
    I calculated the variable cost prices by inflating the prices given first before using them in the calculation so I had:
    Yr 1 (30*1.04) = 31.2 the answer (31.2)
    Yr 2 (28*1.04) = 29.12 the answer (30.3)
    Yr 3 (27*1.04) = 28.08 the answer (30.4)
    Yr 4 (27*1.04) = 28.08 the answer (31.6)
    how were these arrived at?

    November 19, 2011 at 10:01 pm #89419
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54754
    • ☆☆☆☆☆

    The reason is that if the flow is in year 2 (for example) then you should inflate for 2 years. You have only inflated for 1 year.
    So….if you inflate for 2 years you get 28*1.04*1.04 = 30.3 (and so on for the other years – for 3 years multiply by 1.04 three times. etc..)

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