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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Q16 Jonas Chemical BPP kit
I´m completely lost with b i) part of question Q16 (page 125).
Please could you tell me how to get a 2.7 % probability of negative NPV from Z standard deviations of 1.9265?
and then they say:
at the 98% level ?= 1.645 (how to calculate it?)
Project VAR 1.645 X 1.02 X 3.162 =5.3 M (where do you get the 3.162 number from?)
and then they are writing that the above assumes 95% confidence level (no idea where they got 95%, if before they were mentioning 98%). They also say that at 99% confidence the project VAR would be 7.51 m. how is this calculated?
Many thanks for your help!
The 98% is a typing mistake – they should have typed 95%.
If you look up 1.645 in the normal distribution tables, you get about 0.45 (half way between 1.64 and 1.65). If you had 0.5 to this you get 0.95 (or 95%).
So..they have worked backwards using the tables.
So….for 99%, if you take 0.99 – 0.50 you get 0.49. Then if you look in the tables which value gives and answer of 0.59 you get about 2.33.
Thank you John!
You are welcome