1. What is the concept "the time value of money"? Research in textbook or online, briefly write down your understanding of this concept.
2. Applying this concept: Let's say that bank's interest rate is now 3%. Now Warren Buffett offers you two options: (a) he'll give you $1,000 in a year from now; and (b) he'll give you $960 now. Which one would you choose and why?
3. In the HMT case, we compare two investment projects. Which project is riskier? To evaluate investment projects we need to choose a discount rate for each project. On which project should we apply a higher discount rate, the riskier project or the less risky project? (to assist your thought process, imagine a risk-free investment, so essentially it's like depositing money to the bank, what discount rate shall we use on this project?) Thank you so much!

Richard Ivey School of Business The University of Western Ontario HIGH MOUNTAIN TECHNOLOGIES IVEY 9B10N019 Dan Thompson wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to protect confidentiality. Richard Ivey School of Business Foundation prohibits any form of reproduction, storage or transmission without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Richard Ivey School of Business Foundation, The University of Westem Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail cases@ivey.uwo.ca. Copyright 2010, Richard Ivey School of Business Foundation Version: (A) 2010-09-03 Authorized for use only in the course C - GDBA 532 Accounting at Eastman Systems Inc taught by Yijing Jiang from 11/21/2023 to 11/22/2024. In 2009, David Rogers, CMA, accepted a transfer from collections to work as an analyst for the New Products Review Committee (NPRC) of High Mountain Technologies Ltd. (HMT). In this new position, he would be responsible for evaluating different products that the committee was considering for launch. As per company policy, the net present value (NPV) approach was used and an appropriate cost of capital was determined for each project. Rogers did not have any practical experience in the areas of capital budgeting or cost of capital, but he did study these areas when he completed his Bachelor of Commerce degree five years previously. In anticipation of his new responsibilities, he purchased a number of reference books and began a disciplined regiment of home study; he was committed to being prepared when he received his first assignment. INNOVATION PROCESS HMT was a diversified research and manufacturing company that produced a wide array of innovative products based on patented technology. With this patent protection, HMT was able to earn superior profits and protect itself from intense international price competition. HMT's corporate headquarters and research and design facility were located in Toronto, and it had a number of production plants in Ontario as well as Michigan, Ohio and Indiana. Jacqueline Edmunds, P. Eng., was the vice-president of research and design for HMT. She chaired its NPRC made up of engineering, marketing and finance professionals who were responsible for determining if new product concepts were technically feasible and had sufficient market potential to justify investment. New product proposals were initiated by HMT's research staff, but the company also encouraged ideas from independent inventors. The company supported this group through its Product Innovation Fund (PIF), which provided seed funding to promising new concepts: these funds were allocated by a separate committee in order to prevent bias in the decisions of the NPRC. 21