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Discounted payback period questions

D

DevonMatthews

Member
Does anyone have any tips on taclking these questions in the exam?

They seem to be the hardest class of question that can be asked, and can be increadibly draining even doing them at home with no time restrictions due to their trial and error nature and the high number of potential calculations involved

What are some good tips if faced with a question like this on the exam?
 
With trial and error, you need to make a good stab first. Beyond that, I can't offer much help but don't go for over-precision in your answer.

If you have to abandon the qn and come back, make sure you have a good audit trail so you have picked up lots of method marks.
 
Do you have an example?
If you give one and maybe your approach, maybe someone can point out areas where you can be more efficient.
 
didster said:
Do you have an example?
If you give one and maybe your approach, maybe someone can point out areas where you can be more efficient.
Click to expand...

No specific example, just saying in general, what are some good tips to make sure you dont turn a DPP question into an absolute mess, because they can sometimes carry one quater fo the weight of the whole paper, and generally become exponentially more difficult under time constraints. Also questions on NPV can be much the same, but the soultion method is usually alot more obvious and only involves evaluating an equation of value once, as opposed to a number of times

basiclly i mean how do you know wether to go for an algebratic solution which could be "safer" but not always possible, or try and work it out by trying out different NPVs at different times which could potentially be time consuming if your starting point is way off
 
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I'm afraid there's no hard and fast rule that I know of on when to solve algrebraically and when to use trial and error.

I would allow myself to be guided by the wording of the question (if there were any clues there, eg first being asked to show the DPP was more than a certain time period, or being asked to calculate the NPV of payments up to a certain time) and the complexity of the situation.

So, I'd say it was about the exercise of judgement rather than the application of rules.
 
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