NPV - Mock Exam

sophie_612
sophie_612 LondonRegistered Posts: 136
Hi,

Would someone be able to explain to me how the worked out the npv and the payback on the attached?

Thanks
Sophie

Comments

  • dumutroba
    dumutroba AAT Student, AATQB Posts: 264
    edited January 2019
    Npv
    -260000 this is your initial cost and is negative figure, the rest are positive figures and represent income
    -260000+44828.6+44632+40868.8+37587.60+36174.6=-55908.4
    The npv is negative so the projrct us not viable and should nit go ahead
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  • dumutroba
    dumutroba AAT Student, AATQB Posts: 264
    edited January 2019
    Payback is the time that it takes to repay the initial cost in this case 260000. Using the net cash flow we add income untill we reach 260000
    50200+56000+57400+59000=222700
    We require just a fraction (37300)of the year 5 income, therefore

    4 y +(37300/63800*12 months) =4 y and 7 months
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  • sophie_612
    sophie_612 LondonRegistered Posts: 136
    dumutroba said:

    Payback is the time that it takes to repay the initial cost in this case 260000. Using the net cash flow we add income untill we reach 260000

    50200+56000+57400+59000=222700

    We require just a fraction (37300)of the year 5 income, therefore



    4 y +(37300/63800*12 months) =4 y and 7 months

    thank you so much for explaining.
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