Time value of moneyyou have an opportunity to invest in a, Ask an Expert

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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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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91772669

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