June 2007 exam - last questions task 2

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
Did anyone else really struggle on this one?

The rest of the exam was fine (or at least I hope!).

That last question on net present cost really bugged me, I spent 30 mins just staring at it looking for the cash flow to factor into it and there wasn't any!!

In the end I just guessed and put all the costs in, a running balance of the costs and factored the costs to come to a total cost across the years. Totally not what I'm meant to do no doubt, but I didn't want to leave it blank!

When I got home and checked in osbourne, long term decisions and all the way through the book as I thought I was going crazy, I could find nothing on net present cost and without cash flow figures given, only pay back methods with cash flow in and net present value. It's really bugging me now because if I fail on that then it's crazy, we weren’t even taught it!

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:June 2007 exam - last questions task 2

    Hi, this question bugged me too, i spent about 1 hour on the rest of the paper and then another hour just on this question. I didnt understand coz it had no cash flow or sales income, which was how we were taught. I deducted the costs from the captial expense, which i also think is wrong and then tried to decipher what net present cost meant. Oh well, lets just hope no one understood and then they cant penalise us for it!!!!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:June 2007 exam - last questions task 2

    I totally know how you feel!

    I was thinking at first it was printed wrong and the cash flow was missed off. I read it again and again thinking I missed something that was giving me a clue to the cash flow but nothing. So I read the whole paper through and just checked my answers as it was spinning me and, then when I got to it again I just felt like I was hitting a brick wall.

    I've still really got no idea what was going on with it, but for sure if there were lots of people learning from the osbourne publications, they really would have no idea as well I'm sure. So hopefully they will scratch it!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:June 2007 exam - last questions task 2

    I thought the same too and couldn't find any cashflow!! I just used the expenses and worked it out from there. I think there may not have been cashflow as it was a ticket machine for buses and they could not guess there income as they don't know how many passengers they will have. I concluded that if I used the expenses to work out the NPV then that would be total they could spend on a new machine. Who knows if it is right though??!!
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:June 2007 exam - last questions task 2

    Yes it was a really obscure question and I too spent ages looking at it. In the end as it said NPC & not NPV I assumed it was looking for the total overall cost of the new machine of the economic life. I discounted all the operating costs in the same way you would with an income, but used them all as negative figures, I then added these costs to the capital outlay and came out with large negative figures for both. I then reccommended the project with the lowest overall cost Project A. I spoke to my tutor in college about this today & it seems this was the right thing to do. Even he was surprised they set the question. I hope this helps anybody who is wondering which was the correct way to do this. Any more info feel free to mail or private message me.
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:June 2007 exam - last questions task 2

    ahh great, thats pretty much what I did, I discounted all of the costs and then added up the initial outlay and all of the discounted cost figures to give a total cost.

    A was the cheapest, B over took the total cost by year 3 :)

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