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Sir in jun 12 question when calculating value of the option to delay pa is taken as a present value of positive cfs. My question is
1. Why only positive cf
2. Shouldnt we discount this for another two years. Because as we delay the project cfs will also be delayed
3. Nd1 is calculated using 3 decimal points . What if we just go with two points ?
1. I don’t know what you mean – the NPV has been calculated by subtracting the PV of the outflows from the PV of the inflows, in the normal way.
2. The figures given in the question are already PV’s – they have already been discounted.
3. No problem.