How does cash flow affect the evaluation of an investment

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Accounting Assignment

1. In the context of present value analysis, what is the discount rate? How does the discount rate affect the present value calculation? If the present value of a future return is calculated using a discount rate of 8%, what can we expect the present value analysis to reveal if the discount rate is changed to 10%? What if the discount rate is changed to 6%?

Your response should be at least 75 words in length. For problems, be sure to answer all questions and provide all requested information.

2. Start Mashup Scuba Supply Company is considering making an investment of $1,000,000 and estimates that the result of the investment will yield the following returns over the next five years:

        Year 1

        ($500,000) - a loss

        Year 2

        $200,000

        Year 3

        $610,000

        Year 4

        $740,000

        Year 5

        $800,000

Estimate the internal rate of return on this investment.? ?For problems, be sure to answer all questions and provide all requested information. Your response should be at least 75 words in length.

3. How does cash flow affect the evaluation of an investment? If an initial investment will be $100,000, which is better, a one-time return of $120,000 received in one year after the investment is made, or a return of $10,000 every month for that one year?

For problems, be sure to answer all questions and provide all requested information. Your response should be at least 75 words in length.

4. An investment that requires a one-time payment of $12,000 will return $5,000 per year for the next four years. If the required rate of return is 11%, calculate the net present value of the investment (ignore the effect of taxes). Should this investment be made?

Your response should be at least 75 words in length. For problems, be sure to answer all questions and provide all requested information.

Reference no: EM131333128

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