HELP - ECR DECEMBER 2003

System
System Posts: 100,534 🤖 Admin 🤖
edited 10:30AM in AAT student discussion
Can someone please help me as I am really stuck on question 2.3 part a on ECR December 2003 paper.<BR><BR>It states to calculate the payback period and the answer is 2.9 years. It doesn't provide any workings behind the answer and my mind has gone blank.<BR><BR>If someone could please gide me through the workings to get this answer I would be really grateful.<BR><BR>Good Luck to everyone for next week<BR><BR>Mel

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    HELP - ECR DECEMBER 2003

    Hi<BR><BR>If you work out the profit each year, which is the Sales Revenue less the Variable Costs, and deduct this from the Capital Expenditure:<BR>Year: Profit:<BR>0 (500)<BR>1 (440)<BR>2 (290)<BR>3 30<BR><BR>From this we can see that in year 3 the capital expenditure has been paid back. However we can see that it took less than three years as there is a positive figure of £30. <BR>Year 3 had a profit of £320 (800-480) but only £290 was needed to achieve payback. Therefore to calculate when during year 3 was £290 achieved.<BR><BR>Amount needed to achieve payback that year / Amount made that year<BR>£290/£320=0.9<BR><BR>As it took 0.9 of the 3rd year, you get 2.9 years<BR><BR>To find it in months times the 0.9 by 12 months to get 10.8 months. Meaning that payback took 2 years and 11 months (when rounded up).<BR><BR>Hope you can understand my long winded explanation.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    HELP - ECR DECEMBER 2003

    Thanks that really helps mel :-)
  • System
    System Posts: 100,534 🤖 Admin 🤖
    HELP - ECR DECEMBER 2003

    That was extremely helpful to me as I was totally miffed.<BR>Just need to learn it now....<BR>Good luck!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    HELP - ECR DECEMBER 2003

    I get the same answer as you but in the answers it says 2 years 9 months?

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