If a company has following cash inflows
Year 1 10,000
Year 2 10,000
Year 3 10,000
Year 4 25,000
And company requires investment outflows restricted to £60,000 in year 3 and has capital rationing problem in year 3. Assume return rate of 10% from all activities.
How should we approach this problem?
Should we discount all cashflows to year 0 or should we consider all cashflows at year 3 and therefore compound year 1 and 2 cash inflows.
Year 1 10,000
Year 2 10,000
Year 3 10,000
Year 4 25,000
And company requires investment outflows restricted to £60,000 in year 3 and has capital rationing problem in year 3. Assume return rate of 10% from all activities.
How should we approach this problem?
Should we discount all cashflows to year 0 or should we consider all cashflows at year 3 and therefore compound year 1 and 2 cash inflows.
