Comments

  1. avatar says

    Hi John. Shouldn’t we discount the redundancy cost that will be incurred in a years time rather than subtract it from the redundancy cost if we were to discontinue the project?

    • Avatar of John Moffat says

      That would be fine, except that this example specifically says (the last line) to ignore the time value of money (which means to not discount).
      This first example is just a check on relevant costs.

  2. avatar says

    Thank You! A great lecture! :)
    But I have 2 questions.
    1. If we have to rent the premises specifically for this project, then do we consider it as a relevant cost?
    2. Why don’t we consider $ 40,000 Labour cost as a relevant cost. I get the point why we don’t consider it when we calculate Loss from the other products. But why don’t we take it to account for this project seperately?

    • Avatar of John Moffat says

      If we did rent premises specifically, then we would include them (but we don’t in this question).

      With regard to the labour, we will be paying them whether we move them to this project or whether they stay where they are – there is no extra cost involved.

  3. avatar says

    Thank you truly from the bottom of my heart….. My previous ambiguities about logic of NPV are now clear. You have done a magnificent job. May ALLAH help you in your life, as you helped us.
    DO LET US KNOW IF ME OR MY FELLOW STUDENTS CAN DO ANYTHING, ANYTHING AT ALL FOR YOU AND OPENTUITION

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