Reference no: EM132717784

Discussion Forum: Spending money today or the future?

Should you spend your money today to purchase immediate benefits for the company, or should you hold on to your funds and allow them to grow in value? This is a problem faced by individuals, private companies of all sizes, and government agencies. There is often no easy or perfect answer. Deciding whether to spend or save requires a manager to consider the impact of all sides carefully and make the best decision for the company's value. Imagine that you have had a successful business career and are now drafting your will. You are prepared to bequeath $2,000,000 of your estate. You have been inspired by the American statesman and inventor Benjamin Franklin, who left money to the cities of Boston and Philadelphia, where he had lived and prospered. He left the equivalent of $1,000 to each city with the stipulation that the money could not be spent for 100 years. Both cities waited 200 years, at which point the funds for each city were worth more than $2,000,000. You have decided to leave money to the city in which you have achieved your success. You are going to leave $2,000,000 to this community.

As you think about the present and future value of the money, what requirements will you make on the use of the funds? Will you allow the citizens of this community to use this money right away to solve immediate needs, or will you require them to wait 100 years? Explain your decision and at least one benefit and one disadvantage of your choice. Explain how the disadvantage you identify is outweighed by the benefit(s).