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Hello students, here is a question.
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Consider a firm investment opportunity with a cost of $100 ,000 today and the benefit of $1 ,000 or $5 ,000 at the end of one year.
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If the interest is 10%, will you accept the opportunities and why? so, this is our question.
00:16
Let us discuss the answer for this.
00:18
Since you have posted multiple questions, like we can only solve the first sub -question.
00:23
In the fixed asset management, the concept of capital budgeting and the time value of money are used to determine the actual profitability.
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Net present value is a concept which helps to measure the project and the company's worth.
00:35
It can measure through the present value of benefits and the present value of cost.
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So, the details of a firm investment opportunity will be details for the firm investment opportunity.
00:56
So, that will be cost of opportunity.
01:04
The cost of opportunity will be $100 ,000 and benefits at the end of year one.
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So, that is $105 ,000 and interest rate.
01:21
So, interest rate is 10%.
01:22
For the project profitability, we can determine the net present value...