In BSOP calculation why they took time as 3 years
When it’s says will purchase start of 4 year mean end of 3rd year then they are taking Pv of year 4 and (year5-25) as PA 29.863 m then why time as 3 year shouldn’t it be 2 year that is year 4 and year 5?
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Para Fuel – Sept 22
2y ago#1Time 0 is the start of the 1st year, and so the start of the 4th year is time 3.
We always assume (unless told differently) that the operating cash flows occur at the ends of years and so are at times 1 to 4 and then from time 5 onwards.
But is’nt the time “t” is the time of project left after the investment is sold . If they purchase In the start of 4 year (that is end of 3 year ) remaining year is 2? Please correct my concept for t in bsop
2y ago#3I do not know what you mean by the remaining year being 2.
t is the time to expiry of the option and this would be at the start of the 4th year which is 3 years from 'now'.
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