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
Suppose the dividends for the Seger Corporation over the past six years were $1.51, $1.59, $1.68, $1.76, $1.86, and $1.91, respectively. Compute the expected share price at th
The Rodriguez Company is considering an average-risk investment in a mineral water spring project that has a cost of $130,000. The project will produce 800 cases of mineral wa
Draw Jackie's budget constraints in each of these two cases. - Draw representative indifference curves that would reflect each of these scenarios: - Jackie prefers program A t
Bond J has a coupon rate of 3 percent and Bond K has a coupon rate of 9 percent. Both bonds have 17 years to maturity, make semiannual payments, and have a YTM of 6 percent. I
The law firm of Nab-bem and Robb is considering selling stock. It has past dividends of 2011 - $1.15, 2012 - $1.27, 2013 - $1.38, 2014 - $1.47. What should the stock sell for
Broncs Bank has the following liabilities and equity categories: What would be the bank’s total liabilities and capital if owners’ capital were 75% the size of Other Liabiliti
Jan sold her house on December 31 and took a $10,000 mortgage as part of the payment. The 10-year mortgage has a 8% nominal interest rate, but it calls for semiannual payments
A bond that settles on June 7, 2013, matures on July 1, 2033, and may be called at any time after July 1, 2023, at a price of 141. The coupon rate on the bond is 6.6 percent a