Answer to question 50 (carpetshop) part c In BPP revision kit states that time value of money (52.6m and 87.3m) is effectively a premium which company will never recover. I'm confused because company can exercise the option in the 3 or 6 months at 2250m and as assets are worth 2270m it will benefit by 20m (intrinsic value). Could someone explain.
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AFMoption premium and time value of option
Please advise question is which year ???
@mhrosoha said:
Answer to question 50 (carpetshop) part c In BPP revision kit states that time value of money (52.6m and 87.3m) is effectively a premium which company will never recover. I'm confused because company can exercise the option in the 3 or 6 months at 2250m and as assets are worth 2270m it will benefit by 20m (intrinsic value). Could someone explain.
But if the option is not beneficial at the time of exercise than company have to bear the cost of premium.
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