CCT321H5 Lecture Notes - Lecture 3: Cash Flow, Organizational Behavior, Discounting
11 May 2020
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To compare the costs and benefits, we first need to convert them to a common unit: suppose gold can be bought and sold for a current market price of. Then the 10 ounces of gold we receive has a cash value of. The benefits and costs of a decision should be evaluated using these market prices, and when the value of the benefits exceeds the value of costs, the decision will increase the market value of the firm. In 2005, projections for vancouver-area construction costs indicated that costs were rising by about 10%/year. If the interest rate was 3. 25%, what would have been the cost of a one-year delay in terms of dollars in 2005: solution: if the project were delayed, it would cost . 05 billion x (1. 10) = To compare this amount to the cost of . 05 billion in. The npv is equivalent to cash today: problem: your firm needs to buy a new ,500 copier.
