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Hello, Dear John Moffat
Hope you are doing well.
i have a question to ask you on topic sensitivity analysis. it is true that in order to find the sensitivity of the project to discount rate it is needed to find the annuity factor, and from this
we can find the discount rate from the table. so, my question is : how to find the annuity factor? in Kaplan study book, it was found by dividing the initial investment ($40000) by $15000, but i where the figure $15000 came from it is unknown.
one more thing; which topics do you believe have a higher probability of being asked in Section C so that i can focus more on?
THANK YOU SO MUCH
Your first paragraph is true but only if the cash flows are an annuity. Otherwise we need to calculate the IRR as I explain in my free lectures.
As to where the $15,000 comes from I have no idea because I do not have Kaplan books (only the BPP Revision Kit). From what you have written it must be the equal annual net cash flow.
Our lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
As far as Section C of the exam is concerned, the examiner states in the syllabus that “The two 20 mark questions will mainly come from the working capital management, investment appraisal and business finance areas of the syllabus”.