I have a question on discounted cash flow.
Data for the production of a product.
Year 1 Feasibilty costs 10,000
Year 2 capital expenditure 1 million
Year 4 to year 10 net cash inflow of 40,000
Launch date of product is at the beginning of year 4 and expected number of products will be 6,000 each year
Required : calculate cost per product using DCF technique.
My question is that which point we should take as origin for calculations.(origin here i mean the year which should be deemed year 0)
Whether it should be beginning of year 4(the date of launch of product). So that we should compound the year 1 and year 2 costs to year 4. And discount cashflows after 4 to year 4.
Or whether it should be year 0 where we will discount all cashflows to year 0
Or whether it should be at year 2. The year of capital expenditure.
Please guide and save my life
Thanks and regards
Noman Tufail
Data for the production of a product.
Year 1 Feasibilty costs 10,000
Year 2 capital expenditure 1 million
Year 4 to year 10 net cash inflow of 40,000
Launch date of product is at the beginning of year 4 and expected number of products will be 6,000 each year
Required : calculate cost per product using DCF technique.
My question is that which point we should take as origin for calculations.(origin here i mean the year which should be deemed year 0)
Whether it should be beginning of year 4(the date of launch of product). So that we should compound the year 1 and year 2 costs to year 4. And discount cashflows after 4 to year 4.
Or whether it should be year 0 where we will discount all cashflows to year 0
Or whether it should be at year 2. The year of capital expenditure.
Please guide and save my life
Thanks and regards
Noman Tufail
