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The order of Payments

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True or false: "when computing an NPV, it does not matter if high inflows occur after low inflows or vice versa - the order payments has no effect on the NPV" why?

what is high inflows and low inflows?? and vice versa??

please explain the concept.

thanks

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The statement is true. The order of Payments has no effect on NPV since it discounts all the payments to present value that is to Day 0.

High inflows are the major big cash inflows during the project life and low inflows are small cash inflows during the life of the ...

Solution Summary

The order of Payments is overviewed.

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Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron age 4, and are filing a joint tax return in the current year.

1. Lyle and Kaye James are married, have two minor children, Jessica age 8 and Jerron age 4, and are filing a joint tax return in the current year. They are both employed. Lyle and Kaye, ages 38 and 37, respectively, have combined salaries of \$240,000, from which \$42,000 of federal income tax and \$10,000 of state income tax are withheld. Lyle and Kaye own two homes. Their primary residence is located at 11620 N. Mount Ave., New Haven, Connecticut 22222, and their vacation home is on the beach in Fort Lauderdale, Florida. They often rent their vacation home to supplement their income. The following items are related to the James' ownership of the two homes:
Item New Haven Fort Lauderdale
Rental income \$ ? \$15,000
Qualified residence interest 7,200 5,000
Property taxes 1,400 1,000
Utilities 1,000 1,300
Repairs 200 300
Depreciation 0 3,500
Advertising 0 200
Insurance 1,500 1,500
The James family used their Fort Lauderdale home 20 days during the year. They rented the vacation home 60 days during the year. Lyle and Kaye jointly purchase stock in various corporations and make the following transactions in the current year. (None of the stock qualifies as small business stock.)
Date Transaction Price Paid/Sold
2/15 Bought 50 shares of Lake common stock (they own no other Lake stock) \$1,000
5/14 Bought 100 shares of Bass common stock (they own no other Bass stock) 3,000
5/24 Sold 25 shares of Lake common stock 250
5/27 Bought 50 shares of Lake common stock 900
Sold 50 shares of Bass common stock 1,750
7/12 Bought 100 shares of Bass common stock 2,800
The James' have no other income or expense items. Lyle and Kaye's Social Security numbers are 111-22-3333 and 444-55-6666, respectively. Jessica and Jerron's Social Security numbers are 123-45-6789 and 888-99-1010. The James' use the IRS method of allocating all expenses between personal and rental use.
File the James' income tax return Form 1040, Schedules A, D, and E using the currently available forms and rates. Disregard any tax credits for which they may be eligible.

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