• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • FIA Forums
  • CIMA Forums
  • OBU Forums
  • Qualified Members forum
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March 2025 exams.
Get your discount code >>

Question about NPV

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Question about NPV

  • This topic has 1 reply, 2 voices, and was last updated 9 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • November 6, 2016 at 10:40 am #347671
    Anonymous
    Inactive
    • Topics: 1
    • Replies: 0
    • ☆

    Dear Sir, I have to solve this case, but I have no Idea. Please give me exact explanation and formula of this case…

    1. Case text
    Identification of relevant FCF
    A company is considering the possibility of building their own logistics centre on the outskirts of a large city in central
    Poland. Up to this date, the company has benefited from an outsourcing company, which provided logistics services,
    but the recent increase in the cost of external services forced the management to analyze the rationality of such
    project. It is estimated that the capital expenditure will amount to about 9 million PLN, of which approximately 6
    million will be amortized (the rest of the expenditure involves the outlay on the plot of land). The investment
    expenditure can be slightly decreased by the sale of spare office equipment and cars which is being currently used by
    the managers who oversee the cooperation with the external logistic company. It should give additional cash on the
    level of 300 thousand at beginning of the second year of FCF estimation. The average depreciation rate will be around
    10%. The logistics-related costs to date were approximately 4,3 million PLN and analyses showed that with an
    increased range of operations, these costs will grow at a rate of about 10% per year. The analyses also indicate that
    the operational cost of own logistic services, excluding depreciation and amortization, will amount to about 3 million
    PLN per year and will grow at an average rate of 6%. The logistic centre creates also opportunity to provide service
    to external clients. The estimated additional revenue related to this option should not exceed 150 thousands a year.
    It is also assumed that after 10 years, in the case of some changes in the strategy, the whole logistics centre can
    be sold for a price 30% above the initial capital expenditures. It is also anticipated that in the 4th and 8th year of the
    project there will be a need for replacement outlay in the amount of approximately 800 thousand PLN. It is also
    known that the company pays income tax on the level of 19 percent. The weighted average cost of capital (WACC) is
    12 %.
    Additionally please prepare a sensitivity analysis (NPV to potential changes in Sales, Logistics costs, outsourcing costs.

    2. What I understood.(but I’m not sure)
    CAPEX 9million PLN
    Additional cash 300,000 PLN (2nd year)
    Depreciation rate 10%
    Logistic cost 4,3million PLN Increase 10% per year
    Operational cost 3million PLN per year will grow 6%
    Additional revenue 150,000 PLN per year
    Residual Value 30% x CAPEX after 10 years
    Tax rate 19%
    WACC 12%

    I don’t know how adjust this information to formula.

    Please help me..

    November 6, 2016 at 7:23 pm #347740
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54804
    • ☆☆☆☆☆

    I am sorry but we do not help with homework that you have been given.

    If you are taking Paper F9 then you should be using a Revision Kit from one of the ACCA approved publishers – they are full of exam-standard questions together with answers and explanations. If there is anything in the answers that you are not clear about then if you ask here I will do my best to help.

    Everything in the problem that you have typed out is covered in full in my free lectures. The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.

    Paper F9 is not a test on formulae. Calculations are only 50% of the exam – the exam is testing your understanding more than how well you can learn formulae.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • The topic ‘Question about NPV’ is closed to new replies.

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • John Moffat on ACCA F2 Revision
  • sanjarmakh on PPE – Depreciation – ACCA Financial Reporting (FR)
  • sanjarmakh on PPE – Depreciation – ACCA Financial Reporting (FR)
  • hunaiza.19 on ACCA F2 Revision
  • kita0553 on PPE – revaluation upwards – ACCA Financial Reporting (FR)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in