FNPF - NPC Query

Morpheus1980

Hi. I have my FNPF exam next week but am a little confused as to how to treat cash outflows under NPC.

Have been going through the questions in the Kaplan revision kit, and it appears that cash outflows under NPV (e.g., purchase price and annual running costs) are treated as negative amounts. I understand this, as this expenditure decreases the amount of cash in the business. It looks like cash outflows under NPC, however, are treated as positive amounts. I'm not sure I understand this.

Also, to totally throw a spanner in the works, an answer in the Kaplan revision kit for question 31 BUDGE, shows cash outflows under NPC being treated as negative amounts, when all other answers for NPC show cash outflows as being positive. HELP! I'm so confused!

Morpheus1980

No-one responded *sad face*. It's OK, from various practice assessments, it looks like net present value cash flows are treated differently from net present cost cash flows (as one is a cost so is negative, and one is a value so is positive). But I don't totally understand why in the Kaplan revision kit, that costs under NPC were shown as positive in one solution. Can anyone at all advise? Apologies for sounding desperate, it's just that I've got the exam next week and I'd just like to be able to understand it.

missm4ry4m

Hi Morpheus

I'm also studying with Kaplan and I have my exam next week too, which question in particular are you talking about? Maybe I could explain.

Morpheus1980

Thanks missm4ry4m, but I think the panic is over now as I'm just going to chance my luck with the understanding that I think I already have!

How did your exam go today?