Chapter12_Dec_01 - Managerial Accounting Chapter 12 Capital...

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Managerial Accounting Chapter 12 Capital budgeting
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Time value of money: $100 invested at 5% interest $127.63 discounted at 5% are worth $100 today
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Table 12B-1: discounted PV of single cash flow $1 received in the future (p.598)
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Applying time value concept: Value of a present value of stream of $15,000 cash received during period of 5 years discounted at 12%
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Table 12B-2 : discounted PV of series of equal cash flows of $1 (p.599)
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Applying time value concept: Value of a present value of series of $15,000 cash received during period of 5 years discounted at 12% Referring to Table 12B-2 $15,000 X 3.605 = $54,075
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Practice In 3 years, when he is discharged from the armed services, Steve wants to buy an $8,000 power bot. What lump-sum amount must Steve invest now to have the $8,000 at the end of 3 years if he can invest money at: 1.10% 2.14%
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Practice : Annual cash inflows that will arise from 2 competing investment projects: The discount rate is 18%. Compute the PV of the cash inflows for each investment
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Practice: Frank Ormsby of Caldwell is the state’s newest millionaire.
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