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The examiner answer is that it takes 2.78 years to recover half the present value of the project.
Why does he say “half” instead of the PV?
i have seen ur earler response to this – It is only approximate, and is because we are taking the weighted average of the PV’s.
its still not clear to me
when we are asked to comment on duration shud we always mention to recover half of the pv of project?
thank you 🙂
The main purpose of the duration is as an indicator of the sensitivity of the PV to changes in the cost of capital (as I explain in my free lectures).
However if you are asked to comment then you should mention the fact that it is the time takes to recover half the PV.
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