• We are pleased to announce that the winner of our Feedback Prize Draw for the Winter 2024-25 session and winning £150 of gift vouchers is Zhao Liang Tay. Congratulations to Zhao Liang. If you fancy winning £150 worth of gift vouchers (from a major UK store) for the Summer 2025 exam sitting for just a few minutes of your time throughout the session, please see our website at https://www.acted.co.uk/further-info.html?pat=feedback#feedback-prize for more information on how you can make sure your name is included in the draw at the end of the session.
  • Please be advised that the SP1, SP5 and SP7 X1 deadline is the 14th July and not the 17th June as first stated. Please accept out apologies for any confusion caused.

Ct2 IAI May 2011

S

Shikha Agarwal

Member
Ques no. 17:

Why havn't they considered salvage value of 10000 of old system under alternative 2?
.
What rate of discount they hav used for NPV purposes?
.
How can we comment on IRR (without calculating it) on basis of NPV?
.
Please reply as soon as possible.
Thanks
Shikha
 
Last edited by a moderator:
The rate of discount used is 10% as given in the question.

Now since we know that as the discount rate increases, the present value decreases. And the npv of option 1 is more, that means to make it's Pv equal to 0, rate should be increased more than the 2nd option. That's why the irr will be higher for option 2.
 
Back
Top