Invested in order to earn return

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Because the $500,000 must be invested in order to earn the $120,000 per year, the time value of money is important in this decision. If money is not invested, it does not earn interest and becomes less valuable in the future. For example, if you have $500,000 in cash, it will be worth less in the future because inflation reduces money's purchasing power. However, if the $500,000 is invested in a business or the stock market, it has the potential to grow over time and be worth more in the future. This is why considering the time value of money is important when deciding whether to purchase the full-scale simulation room because money must be invested in order to earn a return.

Reference no: EM133334439

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