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Hi I am getting a bit confused of the timing of cash flows, between T0 and T1. Is T0 an immediate payment today? And is T1 the end of the first year?
T0, T1 etc are points in time that are 1 year apart.
T0 is ‘now’ – today.
T1 is the end of the first year / start of the second year.
T2 is the end of the second year / start of the third year
and so on.
We always assume that operating flows (i.e. sales revenue, and costs of material/labour etc) occur at the ends of years (unless told otherwise) and so the first flows are at time 1.
The timing of other flows depends on the wording of the question.
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