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RIVIERE CO (DEC 14)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › RIVIERE CO (DEC 14)

  • This topic has 4 replies, 2 voices, and was last updated 5 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • August 23, 2020 at 4:57 pm #581651
    rummansaleem
    Participant
    • Topics: 9
    • Replies: 7
    • ☆

    this is question RIVIERE CO (DEC 14) from Kaplan exam kit. Kindly confirm that following MIRR working is not correct as investment phase cashflow is added in the return phase cashflows.
    Right?

    Modified internal rate of return (MIRR)
    Total PVs years 1 to 5 at 10% discount rate = €11,840,000 + €2,293,000 =
    €14,133,000
    MIRR (using formula) = [(14,133/11,840)1/5 × 1.10] – 1 = 14%

    August 24, 2020 at 7:41 am #581707
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54758
    • ☆☆☆☆☆

    I am sorry but I do not have the Kaplan Kit (I only have the BPP Kit).

    I do have the original exam question, but Kaplan have obviously amended it because the original question did not ask for the MIRR.

    August 25, 2020 at 2:27 am #581825
    rummansaleem
    Participant
    • Topics: 9
    • Replies: 7
    • ☆

    ok

    August 25, 2020 at 2:56 am #581826
    rummansaleem
    Participant
    • Topics: 9
    • Replies: 7
    • ☆

    Sir this question is also available in BPP Kit. Please could you confirm it as they did the same working. Thanks.

    August 25, 2020 at 7:13 am #581848
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54758
    • ☆☆☆☆☆

    I have found the question 🙂

    The answer is correct and they haven’t done what you say.

    The NPV at 10% is 2,293,000.

    This is the PV of the inflows less the original investment of 11,840,000

    Therefore the PV of the inflows must be 2,293,000 + 11,840,000 = 14,133,000

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