Reference no: EM131048242
TIME VALUE OF MONEY
You have an opportunity to invest in a business venture. For just $50,000 invested on January 1st, you will receive $20,000 in after-tax cash flows per year on December 31st for 3 years.
As you know, if all you cared about was a Nominal Payback Period of "less than 3 years" for your investments, then this would be a good investment since $50,000 / $20,000 = 2.50 years.
However, your financial advisor has told you to consider the "Time Value of Money" whenever looking at a potential investment.
Your advisor suggests that you use Present Value factors at 10%.
Yr 1 = 0.909, Yr 2 = 0.826, and Yr 3 = 0.751
Using these factors, what is the Present Value of your annual cash payments (the sum of the annual benefits)?
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Present value of your annual cash payments
: You have an opportunity to invest in a business venture. For just $50,000 invested on January 1st, you will receive $20,000 in after-tax cash flows per year on December 31st for 3 years. Using these factors, what is the Present Value of your annual c..
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