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Cost of capital

Financial Management

Why cash inflow at 0 year in calculation of npv at two discount rate is shown as negative in brackets although this is an inflow for company?

Atharv Sankliya

CA Inter

★ 3K+

19-Sep-23 01:08

173

Answers (5)

You can consider and calculate inflow. Answer would be same

CA Suraj Lakhotia

Admin

19-Sep-23 07:19

CA Suraj Lakhotia Admin

You can consider and calculate inflow. Answer would be same

But if we consider it as inflow npv by lower discount rate would be negative and npv by higher rate would be positive

Thread Starter

Atharv Sankliya

CA Inter

★ 3K+

19-Sep-23 08:50

Pls share your working

CA Suraj Lakhotia

Admin

19-Sep-23 09:07

Sir answer is same the only difference is npv by lower rate is negative So my question is does this npv by lower rate is negative because if cost of debt is 10% the company is paying more to investor as per discount rate of 10 %

Thread Starter

Atharv Sankliya

CA Inter

★ 3K+

19-Sep-23 09:26

Thread Starter

Atharv Sankliya

As interest rate increases, present value decreases and vice versa. Interest rate lower means PV of outflow is higher.

CA Suraj Lakhotia

Admin

19-Sep-23 10:47

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