34. The process of restating future cash flows in today's dollars is known as: A. Budgeting. B. Annualization. C. Capitalizing. D. Payback period. E. Discounting. project requires a $30,000 investment and is expected to generate end-of-period annual cash inflows as follows: Year 1 Year 2 Year 3 Total $12,000 $8,000 $10,000 $30,000 Assuming a discount rate of 10%, what is the net present value of this investment? Selected present value factors for a single sum are shown in the table below: i 10% n=1 .9091 | 9264 7513 i=10% n=3 i= 10% A. $0.00 B. $21,000.00 C. ($7,461.00) D. $25,033.32 E. ($4,966.68)
Answer
34.E.Discounting.
Discounting means stating the future cash flows in present value
terms.
Budgeting is estimation of revnues and expenses of a future
period.
Annualisation is turning percentages for periods less than a
year into annual percentages.
Capitalising meains recording an expense as a capital item.
Payback period is the period by which initial investment is
recovered in cash.
35.E.($4,966.68)
The following is the calculation of NPV:
| year | cash flow | discounting factor | cashflow *discounting factor |
| 0 | -$30,000 | 1 | (30,000) |
| 1 | 12,000 | 0.9091 | 10,909.20 |
| 2 | 8,000 | 0.8264 | 6,611.20 |
| 3 | 10,000 | 0.7513 | 7513 |
| NPV | ($4,966.6) |