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What to do, when in the question additional information is also given such as,
Addition Revenue from the Project per year
&
Incremental Costs of the Project per year.do these affect the initial cost and how.
(In reference to Q.31 of the MA Mock Test)
In future, if you want me to answer you should ask in the Ask the Tutor Forum – this forum is for students to help each other.
The flows you refer to are the annual cash flows and nothing to do with the original cost. The difference between the extra revenue and the extra costs is the net extra cash flow each year which you would then discount using the annuity factors as explained in my free lectures.
Ah my mistake, I’ll keep in mind the next time I have a question and thanks for the answer.
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