MFT MBA Formula work
OWE\HAVE beggining to set up BALANCE SHEET
Assets are gained by use of FUNDS....Creditors or Owners are source of the FUNDS
ASSETS
Economic resources (things of value) owned by a firm.
Assume you are presented with an investment opportunity that would cost $3800 in today's money. Also assume you can expect to generate $1000 in income per year for each of five years and the prevailing cost of money or interest rate is 8%. The discount factors each year are (Y1: .926 Y2: .857 Y3: .794 Y4: .735 Y5: .681 ) What is the NPV and should you take it?
INITIAL COST - $3800 INCOME PER YR - $1000 NO. of YRS-5 a) Multiply INCOME PER YR by each YR discount rate b)ADD all 5 yrs and subtract INITIAL COST ***IF greater than 0 -then YES take it
OWNERS
Owners (investors) This includes money partners gave to the firm directly or by reinvestment of profits (Owners equity)
CREDITORS
persons or institutions to whom money is owed (lenders)
RETURN ON INVESTMENT (ROI)
the percentage of the total cost of purchasing an investment and the profit made from selling that investment IE- Investment in MexCity is 30,000,000p. Operating income of Firm X there is 6,000,000p. ROI = 6k/30k ..20%
