+1-415-670-9189
info@expertsmind.com
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
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Financial Management) Materials
Merlo, Inc. maintains a debt-equity ratio of 0.60 and follows a residual dividend policy. The company has after-tax earnings of $3,300 for the year and needs $2,900 for new in
A 20-year maturity bond with face value of $1,000 makes semiannual coupon payments and has a coupon rate of 6%. What is the bond’s yield to maturity if the bond is selling for
Describe a situation for which an executor must have immediate cash needs for an estate; use an example in the recent news to illustrate. Then, choose one of the three methods
American Airlines Corp. has bonds on the market with 10 years to ma turity, a yield to maturity of 9 percent and a coupon rate of 9 percent. If these bonds make quarterly coup
Graham Bell has just retired after 30 years with the telephone company. His total pension funds have an accumulated value of $400,000, and his life expectancy is 16 more years
Select a major industrial or commercial company based in the United States and listed on one of the major stock exchanges in the United States. Each student should select a di
Capital Budgeting Exercise 2 Your Company has spent $200,000 on research to develop a new computer game. The firm is planning to spend $300,000 on a machine to produce the new
King Tool Company is expected to pay a dividend of $2 in the upcoming year. The risk-free rate of return is 4% and the expected return on the market portfolio is 14%. Analysts