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Hello Sir,
im having a lot of difficulty to understand no 93 of the BPP kit on sw co. The explanation provided by the answer is not helping much unfortunately. please help meThe $1,000 is a sunk cost and is irrelevant (the $1,000 has already been spent whether or not they use it in the potential project).
If they do not do the potential project then they will have to pay out $400 to get rid of the chemicals. If they do use it in the potential project then they will not have to get rid of them so they will save $400. Therefore when appraising the project the $400 is a saving (so is treated as an inflow).
Have you watched my free lectures on relevant cash flows for investment appraisal? The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.
yes sir i just watched it right now and i stumbled across something that i was having difficulty understanding as well: when to use real rates. very helpful thank you.
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