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Sir, i’m confused for the Pa part where the Pa is $23.13m for option to delay 2 years.
I saw your replies on both these posts :
https://opentuition.com/topic/digunder-07-dec/
https://opentuition.com/topic/digunder-dec-07/Here you said Pa is still $28m
If i were to came across a question like this in the future, should i apply what you taught or the way Kaplan kit shown? (as my revision kit is the latest one, and there’s still no changes made for this answer).
So i dont know which is the correct wayThe question just appeared now after you online..idk why.. but i already applied your method here, which is using $28m as Pa. But the second topic i posted did not appeared in the forum.
“So…..the full value is the NPV plus the extra value of the option (as given by the formula).”
This is what i quoted from one of your post.
so if i were to apply $28m as Pa. I got C= $9.49mso the full value = NPV $4m + $9.49m =$13.49m. Is this what you meant by the quoted?
Yes, that is what I mean 🙂
I don’t know why Kaplan has done what they have done. As I wrote before the correct way is what I do in my lecture and what the examiners own answer does.
It is just possible that maybe Kaplan amended the original exam question (unlikely, but both they and BPP do sometimes amend questions), but I cannot check because I do not have the Kaplan Kit (only the BOO Kit).
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