Why in year 0 the amount taken as positive

Question

Ishita · Answer

Yes but if you ho through tyk q7(ii) the value in year 0 is taken positive So i think its mistaken mightly I would suggest to ask senior student or any faculty

Yeshaa · Answer

Yess that's what the doubt is Thank you for your help

Priyanshu · Answer

You can refer page number 4.10 where introduction of YTM method is given

Priyanshu · Answer

But the treatment is correct it is to be shown as negative value as you can see the same is followed in every other question except the above

Priyanshu · Answer

I am calling it a outflow only for eliminating confusion in calculation of Kp by YTM method I know that in reality it is an inflow for company but in YTM method NPV is calculated from investors point of view this is the logic which I gave my myself. I am not sure about it whether it is Fully correct or not may be there is some other logic behind it

Yeshaa · Answer

In year 0 it is a inflow for the company as it will be receiving the amount And not an outflow for the company Yes it is a outflow from the investor's point of view

Priyanshu · Answer

I think it is incorrect because cash flow at year 0 should be in negative as it is a outflow of cash and if you also apply the basic principle (NPV is inversely proportional to PV factor rate) then you can easily identify that such principle is not holding Good in this solution so it may be a misprint by icai

Yeshaa · Answer

Sent it you may refer there And clarify my doubt if you can

Ishita · Answer

Send clear image of the second qstn as a whole

Yeshaa · Answer

But then in the next question why is it taken as negative then?

Akash · Answer

Cuz In 1st yr amount is recieved by company

Why in year 0 the amount taken as positive

11 answers

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