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Hello
Please tell me when we should treat immediately as Y0 or Y1
The examiner refers to y1 as immediately which is fine, so I take that as y0, but then takes Y15 as if Y0 existed ie the 16th year
Despite the labour of answers, there is no such thing as year 0 or year 1.
It is really Time 0 and Time 1 etc..
They are points in time that are 1 year apart.
Time 0 (‘now’) is the start of the first year.
Time 1 is 12 months later – the end of the first year and start of the second year.
Time 2 is another 12 months later – the end of the second year and start of the third year
and so on.Unless specifically told otherwise, we always assume that operating flows (revenue and expenses) occur at the ends of years. So the first operating flows will occur at Time 1.
I really do suggest that you watch my free Paper F9 lectures on investment appraisal because the idea of the flows being 12 months apart is the whole reason for discounting the way we do – the way we discount only deals with flows that are 12 months apart.
I did watch F9.
So if i buy a machine or invest immediately, the inflow is 12 months later and the investment is always treated as time 0 unless specified a year later for more investment?
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