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

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
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
For the following scenarios, describe a hedging strategy using futures contracts. Discuss the reasons for your choice of contract. A bank derives all its income from long-term
Firm A and Firm B need to raise $100,000,000 of debt to pay for their projected capital expenditures. Firm A is a blue chip company with a high credit rating in the corporate
A five-year project has an initial fixed asset investment of $275,000, an initial NWC investment of $23,000, and an annual OCF of −$22,000. The fixed asset is fully depreciate
Beginning 3 months from now, you want to be able to withdraw $2,000/quarter from your bank account to cover college expenses over the next four years. The account pays .75% pe
Capital budgeting criteria: Mutually Exclusive Projects Project S costs $15,000, and its expected cash flow would be $4,500 per year for 5 years. Mutually Exclusive Project L
In 2004, IBM's financials reported total assets of $111,003 and total liabilities of $79,315. Its market value of equity was $155,459. What was its liabilities-to-assets rat
An alternative to using logarithms to determine the amount of time that it would take to pay off a credit card would be to use a spreadsheet to list the value of the minimum p
Clean Sweep company offers home cleaning service two recurring transactions for the company are billing customers for services performed and paying employee salaries for examp