FINA 3000 Lecture Notes - Lecture 7: Cash Flow, Opportunity Cost

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whitemosquito239

16 Dec 2016

School

University of Georgia

Department

Finance

Course

FINA 3000

Professor

pope

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Document Summary

Suppose that a friend is an entrepreneur and wants you to help fund an opportunity. Suppose he wants to own and operate a zaxby"s franchise and seeks ,000 from you today. What does typical zaxby"s make? (revenue, income, cash flow) Our experiment illustrates the idea of the time value of money. (we want to price opportunity) A dollar today is not the same thing as a dollar expected tomorrow. The evaluation of future cash flows is a fundamental theme underlying all areas of finance. The concept of time value of money is quantified through the use of discounted. Cash flow analysis (dcf) time, value, and money. If we add a few definitions, we can move cash flows across time . A lump sum is a single cash flow at one point in time . also called an amount. We need to define four terms: pv, fv, n, and r. Pv = present value = value of a cash flow today.

Related Questions

You have an investment opportunity in Japan. It requires an investment of $0.93 million today and will produce a cash flow of yen Â¥97 million in one year with no risk. Suppose theâ risk-free interest rate in the United States is 4.1%â, theâ risk-free interest rate in Japan is 2.9%â, and the current competitive exchange rate is yen Â¥110 per dollar. What is the NPV of thisâ investment? Is it a goodâ opportunity?

What is the NPV of thisâ investment?

please provide explanation with calculations so i know where the numbers came from

magentaclam16

You work for a small, local telecommunications company. In five years, the company plans to undertake a major upgrade to its servers and other IT infrastructure. Management estimates that it will need up to $450,000 to cover all related costs; however, as a fairly young company, the goal is to pay for the upgrade with cash and not to take out loans. Right now, you have $300,000 in a bank account established for Capital Investments. This account pays 6% interest, compounded annually. A member of the finance department has approached you with an investment opportunity for the $300,000 that covers a five-year period and has the following projected after-tax cash flows: Year Projected Cash Flow 1 $94,000 2 $114,000 3 $134,000 4 $114,000 5 $94,000 Based on this information, answer the following questions: 1) How much money will be in the bank account if you leave the $300,000 alone until you need it in five years? 2) If you undertake the investment opportunity, what is the Nominal Payback Period? 3) Using the factors for 6%, what is the Discounted Payback Period? 4) What is the Net Present Value of this investment opportunity? 5) Which option â make the investment or leave the money in a savings account â would you recommend to would you recommend to your CEO? Why? What additional factors/information might make you change your point of view? Also how would you show your work using excel

We are told that a dollar today is worth more than a dollar tomorrow. This is logical just due to the effects of inflation alone, but there are a multitude of other factors that also play into this phenomenon. The most significant concern among those factors is the issue of risk. Given that any future investment is based on a set of assumptions and educated guesses, we have to factor in the effects of risk as we look at the value of money over time. For this discussion, do the following: Locate at least one online resource (a link, article, or book, for example) pertaining to the application of time value of money and/or risk & return either within a broad industry context or within the healthcare field. In your discussion, examine the content and then share the resource (post your resource and use APA style). Summarize the resource(s) and what you find useful about it.

FINA 3000 Lecture Notes - Lecture 7: Cash Flow, Opportunity Cost

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