Determine the desirability of investment projects
Course:- Financial Management
Reference No.:- EM13891870

Assignment Help
Assignment Help >> Financial Management

In general, a dollar received today is more valuable than a dollar received one year from now. We can invest the dollar we have today to earn interest so that at the end of one year we will have more than one dollar. It’s crucial to look at the value in today’s dollar of a sum of money to be received in the future. This helps us determine the desirability of investment projects. The fact that there is no payment due for the next six months PLUS free interest may drive customers to purchase products or services. Though sales may increase in the short run, the rate of bad debts could potentially increase.

Fortunately, when customers pay companies up front for a specific product or service, the monetary value of cash received would be worth more than money paid off over time in separate smaller installments. Cash received from customers now can be invested right away, giving companies additional time to make up for the discount previously given. Ultimately, the company is getting a good deal for the small monetary loss of a special offer promotion.

I would potentially use present value calculations to determine if I am really getting a good deal on my purchase: PV= [1/(1+r)^n]

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
Identify which currencies have gained in value against the US dollar (USD) over the previous year. Explain your selection - Calculate the cross exchange rate between British P
In a perfectly efficient market, an active strategy mutual fund that charges a 1% fee has about a 47% chance of beating the index net of fee. In a universe of 5,000 funds, how
A 10-year U.S. Treasury bond with a face value of $10,000 pays a coupon of 5.50% (2.750% of face value every six months). The semi annually compounded interest rate is 4.6% (a
Wayne State offers a tuition financing plan where a $40,000 loan taken at the beginning of the freshman year would pay for all 4 years of college tuition. The plan calls for t
Regatta, Inc., has bonds outstanding that pay an 8.250 percent coupon rate on a $1,000 face value. Investors buying the bond today can expect to earn a yield to maturity of 6.
Night Shades Inc. (NSI) manufactures biotech sunglasses. The variable materials cost is $18.40 per unit, and the variable labor cost is $6.60 per unit. What is the variable co
Units Sold Total Variable Costs Fixed Costs Total Costs Total Revenue Operating Income (Loss). Compute the degree of operating leverage (DOL) based on the formula below. (Do n
The Green Goddess Salad Oil Company is considering the purchase of a new machine that would increase the speed of manufacturing tires and save money. The net cost of the new m