ECR june answers??

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:32AM in AAT student discussion
when i goto look at ecr answers all i get is the chief assessors report ???

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR june answers??

    I emailed AAT regarding this on Friday, hopefully this will be picked up on Tuesday and changed........
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR june answers??

    I don't expect much difference between my answers and those by the Examiner Les Nightingale. if you would like a copy of mine email me with the following Subject:-
    Please can I have your answers to ECR June 2006?

    I have set up an automated reply which includes my ECR answer on excel

    sandy.hood@chichester.ac.uk
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR june answers??

    Message to Sandy Hood - Sandy in the June 2006 ECR paper Q2.5 the question asked based on the previous question to evaluate whether the oven ready meal range should be introduced.

    Sandy you previously stated that you could not reject the project under the payback method & the accept the project under the Npv method. - This is clearly not the case as the Chief Examiner has written below.

    "The correct recommendation based on the positive NPV was to go ahead with the investment,
    whilst that based on the payback, which was longer than the company’s stated policy, was not
    to proceed. Most candidates correctly explained this."
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:ECR june answers??

    Cherry

    Good point

    My answer
    (a) Under the company's policy that capital investment projects must recover their costs within half of the expected economic life this project must be rejected. The economic life is 3 years, which makes the target payback period 1.5 years. The forecast payback takes longer at 1.783 years. It is worth adding that this policy will deny the company a project that would add £260,000 to the value of the business based on the 14% cost of capital.

    This is the same point the examiner is making.

    The accounting principle of NPV is to accept any project with a positive NPV
    Payback acceptance is based on the arbitrary policy of the company
    And in the case of this company the investment would be accepted only if it satisfied both.
    This satisfies the NPV but takes longer than the required payback so the company should reject the investment.

    As we know, arbitrary company policies can be bad for business, and by sticking to this policy the company will deny itself money.

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