DECEMBER 2008 question 2.3

lala2009

Ok I have read the chief assessor's report for this exam and I must admit I have no idea how to answer this question - "unforgivable"!!!

I have looked at the model answer but still struggling - is anyone able to give me a step by step answer pleeeeaase?

:crying:

wolfe

are u talking about pev? pcr/ or dfs???

lala2009

Ahhhh sorry PEV!

SandyHood

I think this is a life cycle costing question

If so:

1. Find the net cash flow each year
2. Find the appropriate PV (or discount) factor for each year
3. Multiply the net cash flow and the PV factor on a year by year basis to produce the discounted cash flowfor each year
4. Add up all the discounted cash flows to find the net present value
5. If the net present value is positive that means the decision to go ahead with the project will add value to the business (as soon as the decision is made).

lala2009

Thank you!

taskey

SandyHood wrote: »

I think this is a life cycle costing question

If so:

1. Find the net cash flow each year

sorry have looked at it again - still clear as mud but now see how the answer was found

thanks anyway

tracy