pev - discounted cash flow dec 2008 and june 2009 papers

iss072

Please can some one help me with this..

I don't remember studying this so I am trying to remember a way of doing this for the exam but I am getting confused

June 2009 exam
question 2.3

(a) asks you to calculate the discounted cash flow of a new machine plus ruinning costs spread from (0 - 5 years)
This seems quite striaght foward as the discount is worked out from 0-5 over the years minus the residul value
but....(b)
asks you to calculate the leasing costs - this is only discounted from (0-4) -WHY?


Dec 2008 -

Task 2.3

(a) seems straightfoward as above new machine and running costs over 5 years - discounted from year 0-5 BUT...

(b) asks you to calculate the labour saving - this answer misses out year 0 - WHY? but then calculates the saving over year 1 -5??


Thanks in advance if any one can shed some light on this

carlap

Hi

This is because b is paid in annually in advance therefore would only be over the 4 years.

Hodan

Hi for Dec 2008, labour saving starts year one. It means that u can't start saving the same year of purchase u at least need a year to run the machine to start saving.

iss072

thanks -