The process of restating future cash flows in today’s dollars is known as:

34. The process of restating future cash flows in todays 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)



Discounting means stating the future cash flows in present value

Budgeting is estimation of revnues and expenses of a future

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.


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)

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