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In the qs it says that net contribution of 150m$ for each of the first 2 yrs will not be able to proceed.You told me that first 2 yrs means yr 0 and yr1,but in this they have taken it as yr1 and yr2
How do i know when i should take the first 2 yrs as yr 0 n yr1 or as yr1 n yr2?And what do we do in the NPV or APV calculation with the activity based costs in this qs?
I have never told you that the first 2 years means yr0 and yr1 !!!!!!
There is no such thing ever as ‘year 0’.Time 0 is now and is a point in time. Time 1 is one year from now. Time 2 is 2 years from now, and so on.
So, the first year starts now (time 0) and finished in 1 years time (time 1).
The second year starts in 1 years time (time 1) and finishes in 2 years time (time 2).
And so on.Unless the question says otherwise, we always assume that the operating flows (revenue and operating costs) occur at the ends of years.
With regard to the activity based costs, you will remember from F5 that activity based costing relates to fixed costs. So these are fixed costs and are therefore not relevant (they are only relevant if you are told that the total for the whole business changes).
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