ACCA FM June 2026: The 5 NPV Cash Flow Errors Costing You The Pass

ACCA FM has had a sub-50% pass rate for four straight sittings — 48% in December 2025. The examiner reports keep flagging the same five NPV cash flow errors. Fix those, and you fix your chance of passing June 2026.

The Section C 20-mark investment appraisal question is where the paper is won or lost. Most candidates already know the syllabus. They lose marks on cash flow technique, and one wrong input cascades through the whole answer.

The five NPV cash flow errors the examiner keeps flagging

Across the 2024 and 2025 examiner reports, the same mistakes appear sitting after sitting:

1. Including sunk costs. Market research already paid for is irrelevant. If it's gone, it stays out of the NPV.

2. Using profit figures instead of cash flows. NPV is built on incremental cash flows. Take operating profit and add back depreciation — depreciation isn't a cash flow.

3. Treating working capital as totals, not increments. Year 1 working capital is the change from year 0 to year 1, not the full balance. The examiner calls working capital one of the most reliable mark-losers in FM.

4. Tax timing errors. If tax is paid one year in arrears, year 1 tax goes in year 2. Read the question.

5. Forgetting tax-allowable depreciation. Depreciation isn't a cash flow, but the tax saving on capital allowances is. Calculate the writing-down allowance, multiply by the tax rate, slot it in the right year.

Why one wrong WACC destroys the whole answer

The September/December 2025 report (Meen Co) is brutal on WACC. The five recurring WACC errors: using book values instead of market values; using the coupon rate as the cost of debt instead of calculating IRR; failing to tax-adjust the cost of debt; weighting components equally instead of by market value; and mixing units ($000 with $).

One wrong WACC input feeds into every discounted cash flow in the NPV. Even if your cash flows are perfect, a wrong WACC turns a 14/20 into a 6/20.

Worked example — profit vs cash flow

Scenario: Operating profit year 1 = $200,000. Depreciation charged = $50,000. Tax rate = 25%, paid one year in arrears.

Wrong answer: Discount $200,000 in year 1.

Right answer: Year 1 cash inflow = $200,000 + $50,000 (add back depreciation) = $250,000. Year 1 tax of $50,000 (25% of $200,000) appears in year 2 — not year 1. Capital allowance tax saving handled separately.

Same scenario, different technique — and an entirely different NPV.

What to do before June 2026

1. Drill Meen Co (SD25) for WACC and Galle Co (SD24) for NPV cash flows. These are the two questions the examining team have effectively pointed at as templates for what's coming.

2. Set up your CBE spreadsheet correctly. One row per cash flow line, one column per year. Tax-allowable depreciation in its own row. Working capital as incremental changes only.

3. Calculate WACC last. Build the cash flow table first, then compute WACC, then discount. If you spot a WACC error under pressure, you can fix it without rebuilding the whole table.

The bottom line

FM's December 2025 pass rate was 48%. Most failures are technique, not knowledge. The five errors above appear in every examiner report. Drill them out before June and you give yourself the pass.