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Just want to confirm that cash inflow from using the project or machine wouldn’t be worth that much becoz of interest being charged to us on amount borrowed or we might have earned interest if machine was not bought for example in Example 1 in year 1 inflow of 20,000 would actually not be 20,000 it would be 18,180 after subtracting interest??? PLEASE tell me that “Am I right or wrong”???
You are wrong 🙁
The cash receipt from the machine will be an actual 20,000.
The company will however either have to pay interest if they have borrowed money, or they will be losing interest they could have earned if they already had the money.
The interest is accounted for in the discounting.I think i also said the same thing which you just said in your reply to me!!! So where exactly I was wrong.??.
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