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Just went through this question in d Kaplan exam kit. Discovered in the answers that the cash flows of receipts and payments started in the second year however, I did not see anything in the question suggesting 2 year. Please kindly advice how this was arrived.
Thanks
I don’t have the Kaplan exam kit, but I am guessing that you mean a question called Speepon from the December 2005 exam.
Assuming you do, then the reason is that the question says (in the fourth paragraph) that the hotel will be working in one years time. So there will be no revenue in the first year (while it is being built) – it will start in the second year (as will the running expenses).
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