Management and Organizational Studies 3370A/B Chapter Notes - Chapter 13: Current Liability, Weighted Arithmetic Mean, Net Present Value

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 3370A/B
• Professor: Barry Hawn

Document Summary

The time value of money: projects that promise returns earlier in time are preferable than projects that promise later returns. Immediate cash outflow, initial investment: any salvage value realized from the sale of old equipment can be recofnized as cash inflow or reduction in required initial investment, working capital: current assets- current liabilities, current assets will usually increase. Treated as a part of initial investment of project: projects may require periodic outlays for repairs and maintenance for additional operating costs. When company sells of inventory or collects recievables. Recovery of the original investment: when computing present value, depreciation is not included, depreciation not actually cash, discounted cash flows method autmotically provide for return of the original investment, deduction of depreciation uncessary. The annual returns you are getting, part of it is paying for the investment, other is recovery of investment (paying the investment) Investment cost outstanding decreases each year till 0 at end of project.