ACCA FM NPV: 4 Examiner-Confirmed Mistakes to Fix Before June 2026
More than half of FM candidates fail each sitting. The examiner's reports from March/June 2025 and September/December 2025 identify the same errors causing it — errors that have nothing to do with not knowing the theory.
Mistake 1: Treating profit as cash flow
This is the biggest mark-loser in Section C investment appraisal questions. The examiner reported that "too many candidates did not make either of the necessary adjustments from (loss)/profit to cash flow, made only one of the adjustments or made errors in the adjustment(s) such as deducting the costs rather than adding them back."
When a question gives you profit figures, you must convert them to cash flows before discounting. That means adding back two things: depreciation (a non-cash charge) and any sunk cost amortisation already charged — for example, R&D costs expensed over the project life.
Wrong approach: Year 1 operating loss = ($75,000). Use this directly as the Year 1 cash flow. Result: NPV is significantly understated and you lose most of the available marks.
Correct approach: Year 1 operating loss = ($75,000). Add back R&D amortisation $50,000 (sunk cost — not a relevant cash flow) + depreciation $150,000 (non-cash) = operating cash flow of $125,000. Now apply the discount factor.
If the question hands you profit figures, your first task is always to strip out the non-cash items before you touch discount factors. Build a dedicated working for this conversion — it makes your method marks easy for the marker to award.
Mistake 2: Getting the tax direction wrong
The September/December 2025 examiner report is direct: "on too many occasions the direction of the cash flow was not correct in all years." Tax is a cash outflow — it reduces your NPV. When operating cash flow is negative, tax relief is a cash inflow.
The most common trap: candidates see a negative operating cash flow and either ignore the tax relief entirely, or incorrectly show it as an outflow. Both approaches cost marks.
The rule: Positive operating cash flow → tax payable → cash outflow (negative in your table). Negative operating cash flow → tax relief → cash inflow (positive in your table). Always verify the sign of every tax cell in your spreadsheet before moving on to the next row.
Also watch timing. The March/June 2025 report highlighted candidates incorrectly deferring tax when the scenario stated it was payable in the same year as the cash flow. The scenario always tells you — read it.
Mistake 3: The IRR interpolation double-negative
This error catches candidates who know the formula but rush under exam pressure. Using linear interpolation to find IRR, the denominator requires adding the absolute values of both NPVs.
Wrong: IRR = 7% + [35,000 ÷ (35,000 − 25,000)] × (11% − 7%) = 21.0%. This is wrong because it subtracts the negative NPV instead of adding its absolute value.
Correct: IRR = 7% + [35,000 ÷ (35,000 + 25,000)] × (11% − 7%) = 9.3%. The negative NPV at the higher rate is added in the denominator, not subtracted.
Write the formula out in full before substituting numbers. If you are using the CBE spreadsheet, use the built-in IRR function — it is faster and removes this error entirely, provided you have labelled your cash flows correctly across the correct time periods.
Mistake 4: Using nominal value instead of market value in WACC
The September/December 2025 examiner report confirms this directly: "common errors included using book values instead of market values, failing to weight costs correctly." These errors hit you in two places — the cost of equity calculation and the weighting step.
For equity: use the ex-dividend market share price multiplied by the number of shares in issue. Never use the nominal value of shares or the book value of equity from the balance sheet. Reserves are already reflected in the market price — do not add them separately as a source of finance in your WACC weighting table.
For redeemable loan notes: use the market price per loan note multiplied by the number of loan notes. If the loan note trades at 97.5% of $100 nominal, the market value is $97.50, not $100. The market value of the total holding is then $97.50 × (total nominal ÷ $100).
For bank loans: these are not traded on a market, so use book value — but this is the exception, not the rule.
What to do in the next 18 days
Pull up the Section C questions from the March/June 2025 and September/December 2025 sample exams on the ACCA Practice Platform and work through them on the CBE spreadsheet — not on paper. The examiner specifically flags that candidates who have not practised on the spreadsheet before exam day are slower and make more formula errors.
For every NPV question, write a dedicated profit-to-cash-flow conversion working before touching discount factors. Make it a habit before June.
On tax: annotate the direction explicitly as you set up each row. Write the sign before committing the figure to the spreadsheet cell.
The numbers
FM's global pass rate has hovered between 46% and 51% across recent sittings — meaning over half of candidates fail each time. Investment appraisal appears in Section C of every FM sitting. The examiner has published exactly where the marks are being lost across two consecutive reports.
There is no excuse for losing marks on technique errors the examiner has already told you about. Fix these four before June 1.