# 英语论文网

### 联系方式

##### Financial Management [19]

00 (0.751) + 5,000 (0.683) – 50,000
= \$-889
NPV (abandoned end of year 3)
= \$24,000 (PVIF 10%, 1) + 18,000 (PVIF 10%, 2) + 12,000 (PVIF 10%, 3) + 5,000 (PVIF 10%, 3) – 50,000
= 24,000 (0.909) +18,000 (0.826) + 12,000 (0.751) + 5,000 (0.751) – 50,000
= \$-549

NPV (abandoned end of year two)
= \$24,000 (PVIF 10%, 1) + 18,000 (PVIF 10%, 2) + 20,000 (PVIF 10%, 2)
= 24,000 (0.909) +18,000 (0.826) + 20,000 (0.826) – 50,000
= \$3,204
NPV for end of year one
= \$24,000 (PVIF 10%, 1) + 30,000 (PVIF 10%, 1) – 20,000
= \$-914
The economic life of the truck project is after two years; because the net present value is positive which is differ from the others that are negative.

QUESTION 1
a) The time value of money is always defined as the idea that a dollar now is worth more than a dollar in the future, which means money available at the present time is worth more than the same amount in the future. The amount of money that we have now, we can use it to earn interest, it has a potential earning capacity. In other words, the value of money is not fixed, and it changes over a period of time.
Subsequently, a bird in the hand is worth two or more in the bush is usually used to describe the phenomenon of time preference of money and it refers to several factors which are investment opportunities; preference for consumption and risk. We can use the things that we have now to create or earn more. It tells us to appreciate what we have now rather than trying to get more and risk losing everything, better to take the current offer to have the initial advantages.
However, there are several capital budgeting approaches ignores the time value of money. This is the weakness of payback period approach which ignores this concept and as well as the accounting rate of return approach and simple interest rate approach.
b) There are several techniques of capital budgeting, some of the methods are based on the accounting rules and accounting earnings. However, the accounting rate of return can not be used as a reliable capital budgeting technique because some small companies may not make reliable estimates of future cash flow and the this method is not that commonly accepted in assessing the profitability of capital expenditure.
On the other hand, this method is not a reliable capital budgeting technique, since it ignores the time value of money, the value of cash flows does not diminish with the time and length of life of the projects. Moreover, the method of accounting rate of return is not to maximize the market value of shares as the company’s objective, and couldn’t recognize the fact that we can use the profits earned to reinvest.
On the contrary, there are still some advantages of this method, first of all, it is very easy to understand and widely used; and this is the simple way to compare performance between public and private enterprises. [ http://www.slideshare.net/sagar_sjpuc/capital-budgeting-presentation-775435]This method takes into account saving over the entire economic life of the project. Therefore, it provides a better means of comparison of project than the pay back period. To ensure a compensation of expected profitability of the projects, this is a better method that through the concept of ‘net earnings’ and it can be calculated with accounting论文英语论文网提供整理，提供论文代写英语论文代写代写论文代写英语论文代写留学生论文代写英文论文留学生论文代写相关核心关键词搜索。

Europe （24-hours）
EN：13917206902
china （24-hours）
CN：13917206902

全天候24小时在线客服
QQ:949925041