I tried to calcularte the NPV
Year0: -185
Year1 CF: 66
2: 69.6
3: 75
4: 82.2
5: 91.2 + 35 (terminal) = 126.2
r = 10%
I get 123.37 yet answer says it is 142. Anyone else know what I might be doing wrong?
Your CF flow is wrong
basically u gotta calculat the incremental CF from change in Depreciation assumption. So CF1=7998=t*increase in D
I understand but thge NPV with accelerated depreciation is given to you. I should also be able to get the answer by calculating the NPV using straightline and then the answer should be the difference between the 2 NPVs. Which will equal the way in yout method by using the change in CF
seems like the npv given in the question is erroneous. Baffled people last year also:
http://www.analystforum.com/forums/cfa-forums/cfa-level-ii-forum/91259075
I did it that way first also but then used the incremental cash flows and got the answer. I thought both methods should get the same result
had the same problem - the answer says that you don’t need to calculate the NPV of the first table to come up with the result, hence I thought they made an error by not verifying that both ways lead to the same answer