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Hello Sir John muffet.

This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.

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March 19, 2022 at 4:53 am #651513
dennissherpa101
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My question is regarding the comparability of replacement cost in year 2 and 3 and even year 1. when we discount doesn’t that mean that it is the cost that would be paid equivalent to year 0?
March 19, 2022 at 11:35 am #651521
John Moffat
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Yes it does. However because the machine keeps being replaced and the cash flows keep repeating, then so does the PV keep repeating in perpetuity.
March 19, 2022 at 12:21 pm #651523
dennissherpa101
Member
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sir If the cost is already brought to year 0 then why is it not comparable. ?
March 20, 2022 at 7:35 am #651535
John Moffat
Keymaster
- Topics: 57
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Because it is only the cost of the first machine that it brought to year 0. The machine is going to be replaced indefinitely and the same cash flows will therefore be repeated indefinitely.
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