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1.another one paper at DEC 12. The question 4, for the PDur05 project, the time line states that $2500,000 occurred in year one(immediately), the answer process just regard it as year 0. can I understand like this: if the question states that the project investment happened immediately, so the it should be regarded as year 0, then the following years would be put ahead one year when calculations. am I right?2. also in the paper, for the Q2 at the page of 21(answer), when calculating the cost of option, examiner use 48601*(1+0.037/3)=49200. I do not know how to get the 0.037?
thanks so much!1 There is no such thing as year 0, year 1 etc..
Time 0, time 1, etc are points in time that are one year apart.Time 0 is now – the start of the first year.
Time 1 is 1 year from now – the end of the first year/start of the second year
Time 2 is 2 years from now – the end of the second year/start of the third year
and so on.(The free investment appraisal lectures for F9 will help you here)
2 2.2% base rate + 150 basis points (both given in the question)
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