sir chapter- project appraisal i am comfused in problem on page no. 15-16. what actualy done in project E. regards mayuresh
For Project E, the example works through all of the cashflows experienced as part of the project (outgo, interest on borrowing, income) year by year to work out the accumulated value of the project's cashflows (ie the accumulated profit) at time 5. If you need further help, you'll need to ask a question about a particular cashflow or calculation.
Hello there, my confusion here is how come the total borrowing for Project E for years 2 and 3 becomes 95,000 dollars, but for year 1 is just the amount of the outlay? why not for years 1 and 2 the borrowings are not just 20,000 and 5,000 dollars respectively? Thanks, Polina
The further outlays are not just £20,000 and £5,000 because we can use the Income received(at the end of year) firstly to pay the interest of that year and then to be invested in the project. So, the further borrowing will be reduced by that amount.Remember, it is said that the Loan can be repaid only at the end of the project. For more clarification, I have attached the detailed solution below. Hope this helps.
Amazing, this makes so much more sense and helps understand the whole concept better. thank you so so much it really helped a lot.
