Question (ii) (a) asks for a description of a model for projecting future profits. As I thought of it, this model is supposed to be a projection of operating profit -> profit before tax -> profit after tax, hence the starting point is the projection of the balance sheet. Surprisingly the examiner's solution speaks about NPV and IRR and obviously a discounted cashflow model... ....I would like someone to clarify to me how these can be used to project profits.
I would say that the examiners report has not separated (ii)(a) and (ii)(b) here. (a) asks about the model for projecting future profits, and the examiner certainly has stuff about projecting expenses, revenues, ona stochastic or deterministic basis, with LOADS of marks for examples of what your profit model might contain. (b) asks about the features of a model for planning future business growth, which will involve capital poject appraisal and assessment of different strategies. For this you would need a model to do NPV and IRR calcs I suppose. Hence the reason that this is incuded in the answer, but I don't think its necessarily part of (ii)(a).
