1. Batesville Manufacturing is considering a capital investment that will provide cash flows of $1,000 a year for 20 years. The payments are spread across the year in daily payments rather than being made at year-end. The effective annual required return is 12%. What is the present value of these benefits: What would be the present value of the benefits if all cash flows occurred at midyear?
Using Excel PV function, we can compute present value of investment. As the payments are spread daily, we will use ...
The solution provides can example to compute mid year discounting for NPV calculation as well as where payments are spread daily.