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Slow fashions

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Slow fashions

Viewing 4 posts - 1 through 4 (of 4 total)
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  • August 4, 2018 at 11:29 am #466083
    Avatarhemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    Sir, in question 5 a(ii) of June 2009 paper, the answer suggested that IRR cannot be calculated on partial projects.

    Could you please explain the reason?

    Thanks

    August 4, 2018 at 3:20 pm #466140
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54843
    • ☆☆☆☆☆

    Because doing (for example) half of a project does not necessarily mean that the future cash flows will all be half of the current flows. We would need to know what the future cash flows were in order to be able to calculate the IRR.

    August 4, 2018 at 7:48 pm #466175
    Avatarhemraj123
    Member
    • Topics: 110
    • Replies: 188
    • ☆☆☆

    But if in this case, if I was to (in exam) make an assumption that since the projects are divisible, all cash flows would be equally proportionate to the amount invested, then would it be fine to calculate IRR on part of the project?

    August 5, 2018 at 10:18 am #466223
    AvatarJohn Moffat
    Keymaster
    • Topics: 57
    • Replies: 54843
    • ☆☆☆☆☆

    Provided that you stated your assumption (although it is very unlikely to be the case in ‘real life’) 🙂

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