Dec 2016 Q4 Fernhust Part (a)

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June 2, 2017 at 7:15 am #389634
pineapplemango
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Hi Sir,
1. How do we calculate a project duration and what does it mean?
2. The answer seems to suggest calculating each year’s PV as a % of Total PV from Y1 to Y4, then multiplying the % calculated by the number of year, why is this so?
3. What if the PV for Y1 is negative, do we ignore it?
4. And why is it said thay 2.78 years is taken to recover half of its NPV? How was the information of “half of it’s NPV” derived?
Thank you.
June 2, 2017 at 7:45 am #389649
John Moffat
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This is all explained in Chapter 8 of our free lecture notes (it is the same whether we are looking at debt borrowing or whether we are looking at a project).
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