Forums
Back
Advanced capital Budgeting
AFM
Sir in qn 37. we are deciding whether to replace after 1 year or 2 year. in such case replacement cost of 55000 will be spent in year 1 and 2 respectively and we have to discount using 0.909 and 0.826. instead of doing this why 55000 is considered as outflow in year 0 [Video Time Stamp: 01:06:24] Video Details ------------- Advanced Financial Management - AFM - Exam Oriented -Tamil Advanced Capital Budgeting Decisions (P) #5. Illustrations 41, 42, 33, 34,36,37,40,
Answers (1)
We are computing EAC for following 3 options we buy a vehicle in year 0 and replace it at end of year 1, or replace at end of year 2 or year 3 in all 3 cases the vehicle is purchased on day 0 we are computing Equalised cost incurred in all 3 cases to check when is the lowest cost incurred i.e when life of bike is 1,2 or 3 years The way we have solved is diff and the way you are looking at it is diff
Your Reply