Problem
This time Ron is at his wits end. He has sent the accounting team out of his office to rework the numbers. "That simply cannot make sense. If I'm making more than I'm spending, it's a good decision; right?" He walks into your office for your weekly meeting and asks rhetorically "If I'm spending $2,000,000 today on a new plant and that new plant is going to produce $205,000 for each of the next ten years in income how can that possibly be a negative net decision for the company?" Can you explain to Ron the concept involved and how that could be a "negative net decision"? (8 marks) Provide constructive feedback to at least two other students' postings. Carol's Tips and Tricks This one is all about the module we're covering this week - Capital budgeting. Ron doesn't understand the concept of the time value of money and how that is used in calculating the net present value of his new plant. It's your job to explain it to him in language that he can understand - plain English, no accounting or finance jargon allowed! Explain to Ron what the Net Present Value (NPV) means in terms.