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Accumulating the additional money

Question: Over the past several years, Helen Chang has been able to save regularly. As a result, today she has $14,188 in savings and investments. She wants to establish her own business in 5 years and fells she will need $50,000 to do so.

1) If Helen can earn 12% on her money, how much will her $14,188 be worth in about 5 years? Will Helen have the $50,000 she needs? If not, how much more will she need?

2) Given your answer to part a, how much will Helen have to save each year over the next 5 years to accumulate the additional money, assuming she can earn interest at a rate of 12%?

3) If Helen can afford to save only $2000 a year, given your answer to part a, will she have the $50,000 she needs to start her own business in 5 years?

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## Q : Calculations of future cash flows

Why should all capital investment proposals include time value of money calculations of future cash flows that are to be received from alternative investments?