Answer:
See below
Explanation:
ENCISCO Corporation.
Cash budget as of November
Beginning cash balance
$31,000
Add:
Budgeted cash receipt
$135,000
Total cash available for use
$166,000
Less
Cash disbursements
($141,000)
Cash surplus
$25,000
Financing:
Borrowing
$25,000
Budgeted ending cash balance
$50,000
Therefore, the company's budgeted cash surplus for November is $25,000. Also, ENCISCO Corporation should borrow $25,000 in order to achieve budgeted cash balance of $50,000
The following transactions occurred during December 31, 2021, for the Falwell Company.
A three-year fire insurance policy was purchased on July 1, 2021, for $12,000. The company debited insurance expense for the entire amount.
Depreciation on equipment totaled $15,000 for the year.
Employee salaries of $18,000 for the month of December will be paid in early January 2022.
On November 1, 2021, the company borrowed $200,000 from a bank. The note requires principal and interest at 12% to be paid on April 30, 2022.
On December 1, 2021, the company received $3,000 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December, January, and February was credited to deferred rent revenue.
On December 1, 2021, the company received $3,000 in cash from another company that is renting office space in Falwell’s building. The payment, representing rent for December, January, and February was credited to rent revenue rather than deferred rent revenue for $3,000 on December 1, 2021.
Required:
Prepare the necessary adjusting entries for each of the above situations. Assume that no financial statements were prepared during the year and no adjusting entries were recorded.
Answer:
Date Account and explanation Debit Credit
Dec 31 Prepaid insurance $10,000
($12000*30/36)
Insurance expense $10,000
Dec 31 Depreciation expense $15,000
Accumulated depreciation-Equipment $15,000
Dec 31 Salaries expense $18,000
Salaries payable $18,000
Dec 31 Interest expense $4,000
($200000*12%*2/12)
Interest payable $4,000
Dec 31 Deferred rent revenue $1,000
($3000/3
Rent revenue $1,000
Dec 31 Rent revenue $2,000
Deferred rent revenue $2,000
In repetitive operations it is often possible to automatically check for quality and then reject parts that are unacceptable.
What are the requirements for something to be used as money?
You want to evaluate three mutual funds. The risk-free return during the sample period is The average returns, standard deviations, and betas for the three funds are given below. 5%. as are the data for the S&P 500 Index.
Fund Avg Std Dev Beta
A 13.6% 40% 1.1
B 13.1% 25% 1.0
C 12.4% 30% 1.3
S&P 500 12.0% 15% 1.0
You want to evaluate the three mutual funds using the Sharpe ratio for performance evaluation. The fund with the highest Sharpe ratio of performance is.
a. fund A
b. fund B
c. fund C
d. The answer cannot be determined from the information given.
Answer:
b. fund B
Explanation:
The computation is shown below;
For fund A
= (Return - risk free rate) ÷ (standard deviation)
= (13.6% - 6%) ÷ 40%
= 7.6% ÷ 40%
= 0.19
For fund B
= Return - risk free rate ÷ standard deviation
= 13.1% - 6% ÷ 25%
= 7.1% ÷ 25%
= 0.284
For fund C = Return - Risk free rate ÷ standard deviation
= 12.4% - 6% ÷ 30%
= 6.4% ÷ 30%
= 0.213
So here the highest sharpe ratio is of fund B
Create a firm model that shows how economists explains the firm level of production that maximizes its profit. Do not use numbers. Just graphs and detailed explanation. Make sure to explain the concavity of the production function and what does it mean.
Answer:
MC ( marginal cost ) = MR ( marginal revenue )
Explanation:
A Firm's level of production that maximizes the profit of the firm is the level where by the MC = MR. i.e. Marginal Cost = Marginal Revenue as shown in the graph attached . shade part depict region where Firm will make the most profit
Attached below is th graphical illustration as required by the question
FCIA deduction consists of
3.
The distinction between a managerial position and a non
managerial position is
a) planning the work of others
b) coordinating the work of others
c) controlling the work of others
d) organizing the work of others
Answer:
c) controlling the work of others.
Explanation:
determine your targetarket
Answer:
A target market refers to a group of customers to whom a company wants to sell its products and services, and to whom it directs its marketing efforts. Consumers who make up a target market share similar characteristics including geography, buying power, demographics, and incomes.
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What is one problem a new bank may encounter when offspring a product or service for a market niche in an area.
A. Market saturation.
B. Established competitors can quickly provide the same service.
C. Physical location of the bank.
D. Customer base too small.
Answer:
D or C
Explanation:
because it just make sense
Hot Dress. Doreen writes a check for a dress to Hot Dresses, Inc., a small specialty shop owned primarily by Betty. Betty was getting ready to go on an extended European vacation and temporarily closed the shop the day after the dress sale to Doreen. When Betty returned, she had a number of other things to do and did not take Doreen's check and some other checks to the bank for three months. Betty was independently wealthy and only ran the shop as a hobby, so she had not been in need of funds. When Betty finally took Doreen's check to the bank, Betty requested that her bank, ABC Bank, deposit the check into her account. When ABC Bank, however, requested payment from Doreen's bank, XYZ Bank, the check was dishonored because of insufficient funds in Doreen's account. Although Betty did not particularly need the funds, she did not like to feel as if she had been cheated; therefore, she demanded that Doreen make the check good. Which of the following parties is the holder of the check?
a. Doreen's bank
b. Hot Dresses, Inc.
c. Betty, because she owns Hot Dresses, Inc.
d. Bety's bank
Answer:
a. Doreen's bank
Explanation:
Since the cheque was dishonored due to the non-sufficient balance in the bank account of the doreen and betty should not feel that she was cheated so she demand doreen to make the good check
So here as per the given situtation, the holder of the check would be doreen as we considered that he is the drawer of the check
So , the option a is correct
Diversification tends to increase portfolio performance, because:____.
A. Diverse portfolios have a higher expected return.
B. Diverse portfolios have a lower volatility.
C. The assets in a diverse portfolio are perfectly correlated.
D. A diverse portfolio is more likely to have a stock inside of it that performs amazingly well.
Answer:
D. A diverse portfolio is more likely to have a stock inside of it that performs amazingly well.
Explanation:
Diversification of portfolio means adding different stocks / shares in investment portfolio.
Option D is correct because when we have different kind of stock, there are chances that if one fails to perform, one can outperform and it is likely to have a stock which can perform amazingly well.
Now we will see that why all the options are incorrect one by one.
option A is not true because it is not necessary that diverse portfolio cannot fail altogether. So it cannot be guaranteed that it will have higher return for sure.
Option B is not true as diverse portfolio cannot have lower volatility if all perform like same.
Option C is also incorrect as correlation is not necessary in diverse portfolio.
May 1: Prepaid rent for three months, $3,000
May 5: Received and paid electricity bill, $130
May 9: Received cash for meals served to customers, $2,300
May 14: Paid cash for kitchen equipment, $2,600
May 23: Served a banquet on account, $1,900
May 31: Made the adjusting entry for rent (from May 1).
May 31: Accrued salary expense, $1,700
May 31: Recorded depreciation for May on kitchen equipment, $420
Amount of Revenue (Expense) for May
Cash Basis Accrual Basis
Answer:
Under the cash basis of accounting, revenue are reported on the income statement only when cash is received. The expenses are only recorded when cash is paid out
Under the accrual basis of accounting, revenue are accounted for when it is earned that is revenue are recorded before any money changes hands.
The answer below is based on the Cash Basis & Accrual Basis rule/
Amount of Revenue (Expense) for May
Cash Basis Accrual Basis
May 1 $3,000 $0
May 5 $130 $130
Mat 9 $2,300 $2,300
May 14 $2,600 $0
May 23 $0 $1,900
May 31 $0 $1,000 ($3,000/3 months)
May 31 $0 $1,700
May 31 $0 $420
Expansion of trade has made the nations of the world more
0isolated
0insensitive
O interdependent
O suspicious
PLZ AWNSER ASAP NEED IT IN 30 minutes
Answer:
O interdependent
Explanation:
Expansion is an activity to expand a business characterized by creating new markets, expanding facilitation, increasing the economy and growing the business world. The purpose of expansion is to become bigger or wider. Expansion will not occur if there are no interdependents, because cooperation is needed
At what credit score range do you think it’s unlikely that banks would offer you a loan or credit card?
Answer:
osisyey you doing today my
When inventories go down in value, accountants adjust the value of the inventory that is recorded on the balance sheet. Sometimes inventory goes up in value. Do accountant's ever adjust the value of inventory upwards? What are the general guidelines that accountant's follow in recording inventory value?
Answer:
Accountants do not adjust the value of inventory upwards. The general guidelines in recording inventory value are to recognize the ending inventory value at the lower of cost or market value and to ensure that transactions are recorded in accordance with the conservatism principle of generally accepted accounting principles.
Explanation:
The conservatism principle requires that all probable losses are recognized as soon as they can be reasonably estimated, while gains should be recognized only when they are fully realized. The lower of cost or market value (LCM) method states that inventory should be recorded at the lower of either the historical cost or the market value. The LCM is in line with the conservatism principle.
Sandra Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the
cash records.
June 30 Bank Reconciliation
Balance per bank
$29,400
Add: Deposits in transit
6,468
Deduct: Outstanding checks (8,400)
Balance per books
$27,468
Month of July Results
Balance July 31
July deposits
July checks
July note collect (not included in July deposits)
July bank service charge
July NST check from a customer, returned by the bank (recorded by bank as a charge)
Per Bank
$36,330
18,900
16,800
6,300
63
1,407
Per Books
$38,850
24,402
13.020
Type here to search
Bi
A
9
Answer:
Sandra Lansbury Company
Bank Reconciliation
Balance per bank statement, July 31 $36,330
Add: Deposits in transit $11,970 ($6,468+$24,402-$18,900)
Less: Outstanding checks ($4,620) ($8,400-$16,800+$13,020)
Correct cash balance, July 31 $43,680
Balance per books, July 31 $38,850
Add: Collection of note $6,300
Less: Bank service charge $63
Less: NSF check 335 $1,407
Corrected cash balance, July 31 $43,680
Which of the following is/are correct?
I. The pecking-order theory states that firms prefer to issue equity rather than debt if internal financing is insufficient.
II. The pecking-order theory suggests that profitable firms use more debt.
III. The trade-off theory of capital structure implies that there is an optimal level of debt for firms, given the benefits of tax shields and the costs of financial distress
a. I only
b. I and II only
c. III only
d. all of the above
e. none of the above
Answer:
c. III only
Explanation:
The correct option is - c. III only
Reason -
III option is correct because The trade-off theory states that there is an optimal level of debt for firms, given the benefits of tax shields and the costs of financial distress
The assumptions of the production order quantity model are met in a situation where annual demand is 5000 units, setup cost is $40, holding cost is $1 per unit per month, the daily demand rate is 20 and the daily production rate is 100. How long is the cycle length (from the moment that production of a new batch starts until the moment all units are consumed)?
A. 10.2 days.
B. 15.5 days.
C. 11.2 days.
D. 16.5 days.
E. 14.6 days.
Answer:
A. 10.2 days.
Explanation:
Production rate(p) = 100 per day
Demand rate(d) = 20 per day
Annual demand(D) = 5000 units
Set up cost(S) = $40
Monthly Holding cost = $1 . So annual holding cost (H) = $1*12 = $12 per unit
Optimum run size(Q) = √{2DS / H [1-(d/p)]}
= √{(2*5000*40) / 12*[1 - (20/100)]}
= √[400000/12*(1-0.20)]
= √ [400000/(12*0.80)]
= √(400000/9.6)
= √41666.66666
= 204.12
Cycle length = Q/d
Cycle length = 204/20
Cycle length = 10.2 days
Use the information below to answer the following questions.
U.S. $ EQUIVALENT CURRENCY PER U.S. $
Polish Zloty 0.2989 3.3456
Euro 1.2379 0.8078
Mexican Peso 0.0752 13.2993
Swiss Franc 1.0299 0.9710
Chilean Peso 0.002071 482.80
New Zealand Dollar 0.8083 1.2371
Required:
a.
a. If you have $280, how many Polish zlotys can you get?
b. How much is one euro worth in U.S. dollars? (Round your answer to 4 decimal places, e.g., 32.1616.)
c. If you have 4.60 million euros, how many dollars do you have? (Enter your answer in dollars, not millions of dollars, rounded to the nearest whole dollar amount, e.g., 1,234,567.)
d. Which is worth more, a New Zealand dollar or a Singapore dollar?
Answer:
A. Z936.77
B. 1.2379
C.$5,694,340
D.New Zealand dollar
Explanation:
a. Calculation to determine how many Polish zlotys can you get
Numbers of polish=$280(Z3.3456/$1)
Numbers of polish =Z936.77
Therefore the numbers of Polish zlotys that you can get is Z936.77
B. Based on the information given the worth of one euro in U.S. dollars is 1.2379
C. Calculation to determine how many dollars do you have
Dollars amount=€4,600,000($1.2379/€)
Dollars amount=$5,694,340
Therefore The amount of dollars you have is $5,694,340
D. Based on the information given NEW ZEALAND DOLLAR is worth more.
MARIN INC. Income Statement For the Year Ended December 31, 2020
Sales revenue $425,500
Cost of goods sold 240,400
Gross profit 185,100
Expenses (including $12,000 interest and $26,000 income taxes) 75,400
Net income $109,700
Additional information:
1. Common stock outstanding January 1, 2022, was 26,300 shares, and 36,100shares were outstanding at December 31, 2022.
2. The market price of Marin stock was $14 in 2022.
3. Cash dividends of $24,000 were paid, $3,600 of which were to preferred stockholders.
Compute the following measures for 2022:
a. Earnings per share
b. Price-earnings ratio
c. Payout ratio
d. Times interest earned
Answer:
MARIN INC.
a. Earnings per share = $106,100/36,100 = $2.94
b. Price-earnings ratio = $14/$2.94 = 4.76 times
c. Payout ratio = $20,400/$106,100 = 0.19
d. Times interest earned = EBIT/Interest expense
= ($185,100 - $37,400)/$12,000
= $147,700/$12,000
= 12.31 times
Explanation:
A) Data and Calculations:
MARIN INC. Income Statement For the Year Ended December 31, 2020
Sales revenue $425,500
Cost of goods sold 240,400
Gross profit 185,100
Expenses:
Operating expenses $37,400
Interest $12,000
Income taxes $26,000
Total expenses 75,400
Net income $109,700
Preferred stock dividends 3,600
Available to common stock $106,100
Additional information
1. Outstanding common stock:
January 1, 2022 = 26,300 shares
December 31, 2022 = 36,100 shares
Additional issues = 9,800 shares
2. Market price of stock = $14
3. Cash dividends:
Preferred stock $3,600
Common stock 20,400
Total dividends paid $24,000
A 2 kg object traveling at 5 m/s on a frictionless horizontal surface collides head-on with and sticks to a 3 kg object initially at rest. Which of the following correctly identifies the change in total kinetic energy and the resulting speed of the objects after the collision?
Kinetic Energy Speed
(A) Increases 2 m/s
(B) Increases Soold 3.2 m/s
(C) Decreases 2 m/s
(D) Decreases 3.2 m/s
Answer:
Decreases 2 m/s
Explanation:
This is an inelastic collision :
m1u1 + m2u2 = (m1 + m2)v
Where ;
m1 and u1 = mass and initial velocity of object 1
m2 and u2 = mass and initial velocity of object 2
v = final velocity of the objects
m1 = 2kg ; m2 = 3kg ; u1 = 5 m/s ; u2 = 0 ; v =?
m1u1 + m2u2 = (m1 + m2)v
(2*5) + (3*0) = (2 + 3)v
10 + 0 = 5v
10 = 5v
v = 10/5
v = 2m/s
what does the word utilities in business mean?
Answer:
Utility is a term in economics that refers to the total satisfaction received from consuming a good or service. ... The economic utility of a good or service is important to understand, because it directly influences the demand, and therefore price, of that good or service.
IN SIMPLE WORDS:
A utility is an important service such as water, electricity, or gas that is provided for everyone, and that everyone pays for. ... public utilities such as gas, electricity and phones.
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Answer
it means water gas or electricity
Explanation:
Utility has several meanings: In economics, it refers to the value for money that people derive from consuming a product or service. ... Value for money, in this context, means 'pleasure and satisfaction. In the world of business, it means a water, gas, or electricity company.
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Waterway Industries estimates its sales at 240000 units in the first quarter and that sales will increase by 26000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Cash collections for the third quarter are budgeted at:
a. $5,735,800.
b. $11,574,800.
c. $8,380,400.
d. $10,056,200.
Answer:
d. $10,056,200.
Explanation:
The computation of the cash collection for the third quarter is shown below;
Sales in quarter 1 is 240,000 units
Sales in quarter 2 is 240,000 + 26000 units = 266,000 units
And, the sales in quarter 3 is 266,000 units + 24000 units = 292,000 units
Now
= (292,000 units × $35 × 40%) + (292,000 × $35 × 60% × 70%) + (266,000 units × $35 × 60% × 30%)
= $4,088,000 + $4,292,400 + $1,675,800
= $10,056,200
Caine Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost S183,399 and has an estimated useful life of 8 years with zero salvage value. Management estimates that the new bottling machine will provide net annual cash fiows of $30,000. Management also believes that the new bottling machine will save the company money because it is expected to be more reliable than other machines, and thus will reduce downtime. Assume a discount rate of 8%.
Calculate the net present value.
How much would the reduction in downtime have to be worth in order for the project to be acceptable?
Answer:
Net Present value = -$11,001Downtime reduction should be worth $11,001Explanation:
Net Present value = Present value of cash inflows - Cost of machine
As the annual cash flows are constant, they will be treated as annuities:
Present value of cash flows = 30,000 * Present value interest factor of annuity, 8 years, 8%
= 30,000 * 5.7466
= $172,398
Net present value = 172,398 - 183,399
= -$11,001
Reduction in downtime should be worth at least $11,001 so that it would enable the project to breakeven at least.
The Aleander Company plans to issue $10,000,000 of 20-year bonds at par next June, with semiannual interest payments. The company's current cost of debt is 10 percent. However, the firm's financial manager is concerned that interest rates will increase in coming months, and has decided to take a short position in U. S. government t-bond futures. See the settlement data below for t-bond futures. (Note: One standard futures contract is $100,000).
a. Calculate the present value of the corporate bonds if rates increase by 2 percentage points.
b. Calculate the gain or loss on the corporate bond position.
c. Calculate the number of contracts required to cover the bond position. Then calculate the current value of the futures position.
d. Calculate the implied interest rate based on the current value of the futures position.
e. Interest rates increase as expected, by 2 percentage points. Calculate the present value of the futures position based on the rate calculated above plus the 2 points.
f. Calculate the gain or loss on the futures position.
g. Calculate the overall net gain or loss.
h. Is this problem an example of a perfect hedge or a cross hedge? Is it an example of speculation or hedging? Why?
Delivery Month Open High Low Settle Change Open Interest
(1) (2) (3) (4) (5) (6) (7)
Dec 103'14 103'14 102'11 102'17 -6 678,000
Mar 102'11 102'23 100'28 101'01 -5 135,855
June 101'14 101'26 100'02 100'12 -5 17,255
I have tried to explain it in extremely simple words and kept it precise too. I have made an excel file and compiled the answer in that clearly. All the parts are clearly mentioned. Please download the document and understand clearly. All the parts are solved independantly. Please find the attached file. Thanks.
Kaiwan, Inc., a calendar year S corporation, is partly owned by Sharrod, whose beginning stock basis is $55,000. During the year, Sharrod's share of a Kaiwan long-term capital gain (LTCG) is $8,250, and his share of an ordinary loss is $33,275. Sharrod then receives a $33,000 cash distribution. Compute the following.
a. Sharrod's deductible loss.
b. Sharrod's suspended loss.
c. Sharrod's new basis in the Kaiwan stock.
Answer: See explanation
Explanation:
a. Sharrod's deductible loss.
= Beginning stock + Long term capital gain - Cash distribution
= $55000 + $8250 - $33000
= $30250
b. Sharrod's suspended loss.
Beginning stock + Long term capital gain - Ordinary loss - Cash distribution
= $55000 + $8250 - $33,275 - $33000
= -$3025
c. Sharrod's new basis in the Kaiwan stock.
Sharrod's new basis in the Kaiwan stock is 0.
A job cost sheet of Sandoval Company is given below.
Job Cost Sheet
JOB NO. 469 Quantity 2,500
ITEM White Lion Cages Date Requested 7/2
FOR Todd Company Date Completed 7/31
Date Direct Direct Labor Manufacturing
Materials Labor Overhead
7/10 700
12 900
15 440 550
22 380 475
24 1,600
27 1,500
31 540 675
Cost of completed job:
Direct materials
Direct labor
Manufacturing overhead
Total cost
Unit cost
(1) What are the source documents for direct materials, direct labor, and manufacturing overhead costs assigned to this job?
Source Documents
Direct materials pixel.gifMaterials requisition slipsPredetermined overhead rateTime tickets
Direct labor pixel.gifMaterials requisition slipsPredetermined overhead rateTime tickets
Manufacturing overhead pixel.gifMaterials requisition slipsPredetermined overhead rateTime tickets
(2) What is the predetermined manufacturing overhead rate? (Round answer to 0 decimal places e.g 135.)
Predetermined manufacturing overhead rate pixel.gif %
(3) What are the total cost and the unit cost of the completed job? (Round unit cost to 2 decimal places, e.g. 1.25.)
Total cost of the completed job $pixel.gif
Unit cost of the completed job $pixel.gif
Answer:
A. Direct materials-Materials requisition slips
Direct labor-Time tickets
Manufacturing overhead- Predetermined overhead rate
B. 125%
C. Total cost $7,760
Unit cost $3.104
Explanation:
1. Based on the information given the source documents for direct materials, direct labor, and manufacturing overhead costs assigned to this job are :
Direct materials-Materials requisition slips
Direct labor-Time tickets
Manufacturing overhead- Predetermined overhead rate
2. Calculation to determine the predetermined manufacturing overhead rate
Predetermined overhead rate=$550/$440*100
Predetermined overhead rate=125%
Therefore the predetermined manufacturing overhead rate is 125%
3. Calculation to determine the total cost and the unit cost of the completed job
TOTAL COST
Direct Material $4, 700
($700 + $900 + $1,600 + $1,500)
Add Direct Labor $1,360
($440 + $380 + $540)
Add Manufacturing Overhead $1,700
($550 + $475 + $675)
Total Cost $7,760
UNIT COST
Unit cost= $7,760/ 2,500
Unit cost=$3.104
Therefore the total cost is $7,760 and the unit cost of the completed job is $3.104
A person states , The $100 billion program passed by Congress last week benefits thousands of people . " What
Answer:
dasdjkasndknajs
Explanation:
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Sam visits Mexico for a business meeting. At the meeting, Sam addresses the vice president of the firm by his first name rather than using his title. This is considered offensive. In the context of Hofstede's cultural dimensions, this difference in cultures is part of the _____ dimension.
A. power distance
B. uncertainty avoidance
C. long-term–short-term orientation
D.masculinity-femininity
E. individualism-collectivism
Answer:
A. power distance
Explanation:
In the context of Hofstede's cultural dimensions, this difference in cultures is part of the power distance dimension, which corresponds to the hierarchical position of the members of an organization and the appropriate relationship form for each hierarchy in an organization that occurs in certain cultures, reinforced by an inequality that already occurs in society.
To avoid offensive behavior in multinational businesses, it is necessary to have multicultural skills that include ethics, respect and knowledge of a new culture and its rules.
You have been asked to estimate the market value of an income-producing property. The table below provides 5 years of projected cash flows for the property. Use the discounted cash flow approach to income valuation to calculate the market value. Assume that you sell the property at the end of year 5 and that the net proceeds from the sale are $5.0 million. Also assume that the discount rate is 7.5%.
Year 1 Year 2 Year 3 Year 4 Year 5
PGI $750,000 $780,000 $811,200 $843648 $877394
EGI $627500 $663000 $717,101 $689,520 $745785
NOI $318715 $331,500 $334,760 $358,550 $372,892
a. $4.18 million
b. $6.11 million
c. $4.12 million
d. $4.40 million
If we will assume that that the discount rate is 7.5%. then the answer is $4.18 million.
What is discount rate?The discount rate of return applied in corporate finance to reduce future cash flows to their present value is known as a discount rate. This rate is commonly a company's Weighted Average Cost of Capital (WACC), needed rate of return, or the minimum rate that investors hope to attain in order to assess the risk of the investment.
Seven annual free cash flow are received from the investment, each worth $100. An analyst uses a five percent hurdle rate to evaluate the investment's net present value, arriving with a value of $578.64. This contrasts with a whole cash flow of $700 that is not discounted.
Shareholders are essentially saying, "I don't care if I get $578.64 at once and today or $100 a year for 7 years." This claim takes into consideration the investor's perception of the investment's risk profile and a multiplier effect that indicates the earning potential on other investments.
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