Abandonment: Option I- Open Now. Shouldn't we abandon the project at t=2 yr where price is 4000 and can't rise above 4500 in 3rd yr?? In the video, you have mentioned to close the mine at 3rd yr. Please explain......Thanks.
Hi sir, In case we start the mine in year 0, and have the option to shut the mine down, Why don't we shut in year 2 when the price is 4500 and why at 4000 in year three? Because in year 2, selling at 4500 is also a loss proposition since (4500-4600) is a loss.
Sir, replacement of machine ( today or after one year ) ka sum ka solution ka video apne record Kiya hai ? Bcoz PM ka question 39(b) ka solution mujhe wrong laag Raha hai .
Sir In abandonment part If we open mine today then we are considering shut down at price of 4000 but if we open after one year then why are we shuting it down at 4500 and not at 4000? (because there is still a chance that price may go up to 5000 in the next year) Please reply soon and thanks in advance.
For a particular year you sell gold at the price which is available to you at hand, which is the price at the beginning of the year. 4000is the price available after three years from 1 year point. By that time we would have sold all the gold. And 3 years would have completed. Now how can we shut down when we have already sold gold for all the three years
Sir, in 1st part.. we considered initial price i.e. 5000 at 1st year, but in pm they have considered 5500 or 4500 with probability 0.5.. isliye even minor difference of 20 is there in pm answer and your answer
Sir, in non abandonment part ,(strt from aftr 1 yr) in the first year itself why we don't extract at the price of 4500 , when there is a chance of 5000 in second year. Please reply.
lafarjhandis BABA because even if we open the mine after 1 year it still would run for 3 years...so first he discounted by taking 3rd year PVF..and further discounted it.. If u see clearly the price falling below 4600 is in 3rd year(from now) irrespective of whether he starts the business now or after 1st year..since the price is market dependent..at 3rd year end price is 4000 which would be used for 4th year.
if i am standing at t=1 then PV factor will be 0.909 for the three years mine will get open so cum. PV will be 0.826+0.751+0683=2.26 my net earnings will be ((9,00,000 * 2.26) - 10,00,000)/0.909. I have to make decision at t=0 and not at t=1 . why we have taken cum. pv factor as 2.4869 instead of 2.26 ?
Chirag Jain .. we have calculated the entire value considering 2.4869 This was calculated as the present value at the end of year one The cash flows discounted were for the year 2 year 3 and 4, but since we were calculating the present value at the end of year one From that point onwards it was only 3 years hence we took 2.4869 But after that in the end we have multiplied the value at the end of year one with probability of 0.50 And again 0.909 to bring it to zero 2.4869*0.909=2.26
Sir u r classes are super sir but unable to understand sometimes while hindi sir i am sorry to say this sir bcz i am from andhra so i cannot understand hindi completely
second parts answer starts at
21:58
Abandonment: Option I- Open Now. Shouldn't we abandon the project at t=2 yr where price is 4000 and can't rise above 4500 in 3rd yr?? In the video, you have mentioned to close the mine at 3rd yr. Please explain......Thanks.
Hi sir,
In case we start the mine in year 0, and have the option to shut the mine down, Why don't we shut in year 2 when the price is 4500 and why at 4000 in year three? Because in year 2, selling at 4500 is also a loss proposition since (4500-4600) is a loss.
Sir 2nd part ke 2nd year me 4500 ki probability 0.125 honi chahiye na instead of 0.25 ?
Sir, replacement of machine ( today or after one year ) ka sum ka solution ka video apne record Kiya hai ? Bcoz PM ka question 39(b) ka solution mujhe wrong laag Raha hai .
That has been revised in new pm bro.. refer pm of oct 2018.
@@Madhavupadhyay1997 thanks Madhav. Yes did got to know about the new applicable PM after the comment and referred the same. Thanks alot :)
Excellent explanation sir. Char baar is question ko pm se lgaya tha but understood so well for the first time. Thank you.
Sir In abandonment part
If we open mine today then we are considering shut down at price of 4000
but if we open after one year then why are we shuting it down at 4500 and not at 4000? (because there is still a chance that price may go up to 5000 in the next year)
Please reply soon and thanks in advance.
For a particular year you sell gold at the price which is available to you at hand, which is the price at the beginning of the year.
4000is the price available after three years from 1 year point.
By that time we would have sold all the gold. And 3 years would have completed. Now how can we shut down when we have already sold gold for all the three years
sir is this an important question for may 17? I am revising right now. please reply asap.
Thank you so much sir, really simplified solution.
Great Explaination!
Sir, in 1st part.. we considered initial price i.e. 5000 at 1st year, but in pm they have considered 5500 or 4500 with probability 0.5.. isliye even minor difference of 20 is there in pm answer and your answer
sir how can download imporatnt ques for nov 17 uploaded by you
Sir, PM Jan 2017 series ka question no. 66 me to perfect hedge ho hi nhi pa raha hai
Thank you so much sir keep it up
why the solution in pm for 2nd part of question is not matching with the answer provided by you.
Jagadamba Vysyaraju....8538 is in PM andn 8533 is our answer, thats hardly 3 rupees of rounding off difference
Sir, in non abandonment part ,(strt from aftr 1 yr) in the first year itself why we don't extract at the price of 4500 , when there is a chance of 5000 in second year. Please reply.
Dreams High , when price at t1 is 4500 that would come to on avg price of 4500, and he wd have loss in each year as its less than variable cost.
Thanku sooooo...much...keep providing difficult questions like this ..
BooK My Dream resolution change kaar
Sir please upload Q no. 49 and 50 of Security Analysis (Bond Refunding Decision) in Practice Manual
Sir in second part when closing mine at 2nd year when price become 4000 then why taking discounting at .751 instead of .826
lafarjhandis BABA because even if we open the mine after 1 year it still would run for 3 years...so first he discounted by taking 3rd year PVF..and further discounted it..
If u see clearly the price falling below 4600 is in 3rd year(from now) irrespective of whether he starts the business now or after 1st year..since the price is market dependent..at 3rd year end price is 4000 which would be used for 4th year.
if i am standing at t=1 then PV factor will be 0.909
for the three years mine will get open so cum. PV will be 0.826+0.751+0683=2.26
my net earnings will be ((9,00,000 * 2.26) - 10,00,000)/0.909.
I have to make decision at t=0 and not at t=1 .
why we have taken cum. pv factor as 2.4869 instead of 2.26 ?
Chirag Jain .. we have calculated the entire value considering 2.4869
This was calculated as the present value at the end of year one
The cash flows discounted were for the year 2 year 3 and 4, but since we were calculating the present value at the end of year one
From that point onwards it was only 3 years hence we took 2.4869
But after that in the end we have multiplied the value at the end of year one with probability of 0.50
And again 0.909 to bring it to zero
2.4869*0.909=2.26
CA Mayank Kothari Got it 👍
perfectly explained again..thnx allottttttt Sir
Thank you so much.. perfectly explained..
Sir please upload sol for que 37 and 40 of new practice manual cap budgeting
Thanks a lot sir... understood very well.
thnks a lot sir i was stuck in this question..my guess was right and i am here
How could there not be a comment on your dress up 😍😍 Looking so .......... handsome 😍😍😍
Kya likha h kuch nhi dikh rha h
Please use board
THANK YOU SO MUCH SIR!!! Ye question exam me aya hoga jab to bacho ki halat kharab ho gyi hogi
Sir ye jaruri tha.. abandonment and shut down ke concept clearr ho gaye
sir pls upload bond refunding problem num 50 in new practice manual from security analysis ..pls pls pls
Nice way to solve questions....
very well explained...ty...do more of difficult questions from pm ..ty
thanku so much sir.....
sir please provide lectures on bond valuation and hedging in forex by using future and options ...( confusing in lot size )
sandeep maheshwari... sandeep ask doubts at 8983475152.
Uploading all the lectures wont be possible
Thankyou sir 1:52
kuch dikhai hi nhi de raha
21:42
thank you sir
Thanks u sir
Sir u r classes are super sir but unable to understand sometimes while hindi sir i am sorry to say this sir bcz i am from andhra so i cannot understand hindi completely
prasanth Gurram ...its going to come in english in 2019