economic income

[archived_user]

In calculating economic income I know we need to calculate the gain or loss year over year…but my question is: is the gain or loss in the very 1st year of the project get calculated as:
cost-new market value=gain or loss
originally calculated market value- new market value= gain or loss…
I feel like I’ve come across some problems that use the original market value as cost- but other seem to make me calculate NPV at t=0 and use that??
thnx!

 

[archived_user]

Economic income is the difference between the beginning of period market value and end of period market value.
Beg. Period market value is calculated as the present value of cashflows including the current period cashflow.
End of period is calculated as the present value of cashflows excluding the current period cash flow.
I think could be wrong. Havent gone through Corp. In a while.

 

[archived_user]

the question is- if they give you a market value at time t=0 do you use that or do you calculate an ‘intrinsic’ market value based on the remaining cash flows?