Hi For this question on increase in maintainance expense, I'm wondering why the value of asset would remain unchanged, as stated in the marking scheme? In addition, how is this question different from 2018 Sep, where the increase in lapses reduces the asset value? Thank you, Cynthia
Hi Maintenance expenses normally refer to future renewal expenses, as opposed to initial expenses. Therefore they will impact future cashflows (ie the BEL) and not the assets. If they were initial expenses, then assets would be impacted. Thanks Em