AQA Business Studies Unit 5W.

Yeah i need soem help on that too, what do we revise? what areas?

Im not doing BUS5 as I did coursework, but my girlfriend is doing it and she is finding it really difficult.
With regards to unit 4 on Thursday can anyone explain Net Present Value and discounted cash flow?
I've been staring at it for hours and just cant get my head around it.
Thanks.


Or, more importantly, does anyone know (from past papers etc) if you need to know this. DO you think you can get away with knowing the Avergae rate of return and payback method explicitly?

I would defo learn NPV, ARR and payback. I've gone through past business papers and I've realised in the finance questions in the past few years theyve concentrated on ratios and havent asked investment apprasial for ages.

Discounted cash flow is the time value of money, i.e. £5 given to you now will be worth more now than in a year - this is mostly due to opportunity cost, if you had the £5 now you could put it in an account get interest (LOL not much tho!!) or due to the fact that having £5 now is a certaincy rather than risking getting the £5 in a year. The book explains it as the opposite of interest rates. So NPV shows how much that £5 would be worth in however many years, e.g. 5 years compared to how much it is worth now. Every year from this year till 5 years time has a discounting factor, a % which the money decreases (interest rates is an increase in that %) so it shows the value of the money in 5 years time (being less due to the discounting factor) compared to now. The NPV is the amount its worth now minus the amount its worth in 5 years time.

Look at the june 2002 paper question 2 and the markscheme. I found looking through this and working out how they got the answer hellped alot.

Does that make sense? It took me ages to get my head around it, and I still don't know if thats right but thats what ive understood it to be. Its very hard to explain.