ACCA FM Investment Appraisal: 3 NPV Errors Costing You Marks in June 2026

Most FM candidates who fail don't lack knowledge — they lose marks on investment appraisal through three specific, avoidable errors the examiner has flagged in every report. Fix these before June and you'll pick up marks others are dropping.

1. Working Capital in the Wrong Place

The March/June 2025 FM examiner's report is explicit: working capital should appear as a cash outflow at T0, after the tax figures — because working capital has no tax impact. Students who include it within the taxable profit calculation get the wrong tax figure, and those marks are gone.

This error compounds. A wrong working capital placement doesn't just cost you the working capital mark — it corrupts your entire tax line.

2. Forgetting to Convert Profit to Cash Flow

NPV requires cash flows, not accounting profits. The FM examiner's March/June 2025 report flags that too many candidates either failed to add back depreciation and amortisation, or added them back incorrectly — deducting instead of adding. If a question gives you profit figures, your job is to strip out non-cash charges before you discount anything.

In the June 2025 Sulu Co question, the amortisation figure needed to be added back to convert from profit to cash flow. Candidates who subtracted it instead distorted every downstream line and lost marks across multiple cells in the NPV table.

3. Including Sunk Costs

Sunk costs are irrelevant to NPV — they have already been spent and cannot be recovered. If R&D has already been incurred, it does not go in your NPV table. If the question tells you a feasibility study cost $200,000 last year, that figure is zero to your NPV calculation.

Candidates who include sunk costs typically score zero across the full NPV question because the error flows through every line. This is a straightforward mark to protect.

Worked Example: Working Capital

Wrong approach: A project requires $100,000 working capital at T0. A student includes it in year 1 operating cash flows and calculates tax on the full profit including the working capital movement. Result: tax is overstated, NPV is wrong, zero marks for the tax line.

Correct approach: Working capital outflow of ($100,000) sits at T0 as a separate row, below the tax calculation. Working capital recovery of $100,000 appears at the end of the project — also below tax. Tax impact: nil. The T0 discount factor is 1.000, so no discounting is needed for the initial outflow.

What To Do Before June

1. Drill your NPV layout from memory. Practise writing out the table structure before you see any numbers: revenue, variable costs, contribution, fixed costs, profit before tax, tax, add back depreciation, then working capital and scrap value below. Know the order cold.

2. Read the March/June 2025 FM examiner's report. It's on the ACCA website under FM examiner resources. Read the specific question breakdowns — not just the overview. The examiner tells you precisely which adjustments candidates missed.

3. Do one full NPV question under timed conditions this week. Mark it against the model answer and identify which of the three errors above you made. Fix that specific error before the June sitting.

Why This Matters

FM's pass rate sits at around 48–50% — roughly half of all candidates fail each sitting. Investment appraisal typically accounts for 20–25% of exam marks. Fixing your NPV technique alone can move you from a fail to a pass. The examiner publishes exactly what goes wrong every sitting. Use it.