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Cost of capital
Financial Management
Sir in this problem Redemption value means we redeem means we pay , so 121 rs it is treated as cash out flow na . And intrest of 7.5 also we pay it is going out so it is also cash out flow . And net proceeds of rs 100 is cash inflow . Then npv should be PV Of CI - PV of CO so 100 - (75 + 28.425 ) after taking in to present value so Npv is -3.425 na It is my doubt where am I wrong they considered intrest and redemption value as cash inflow ??? Why Please reply sir
Answers (2)
Hi Nithin. What you have mentioned is conceptually right. But mathematically whether the computation is done from the COâ??s p.o.v or from that of the investorâ??s , the value will be the same. So as a matter of practice and convenience, where Annual CFs are considered as inflows and initial as outflow, computations are made in those lines
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