The Capital Budgeting Decision

Return to Activity

$2$

Corning Machiline

So that is the present$-$day value of expected cash flow $3$ years from now?

Brandy Miles

Yes, Monster expects a $12\mathrm{.}0\%$ annual return on their investments, so we must discount the future cash flows by $12\mathrm{.}0\%$ for every year in the future they occur.

Monster Beverage is considering purchasing a new canning machine.

This machine costs $$3,500,000$ up front.

Required return $=12\mathrm{.}0\%$

What is the present value of all future cash flows? Note: do not include value of Year $0$ cash flow.

$\backslash$table$[[,$Cash Fiow,Oiscounted Cash Fiow$],[0,$$$-3,580,680,$$$-8,500,000$