In our readings this week, the authors of our textbook described how several businesses have made decisions to spend more money upfront, hoping that they will save money down the road. For example, Staples purchased electric delivery trucks that cost more than diesel trucks, yet the savings in gas and maintenance are anticipated to make up for this expense. With this kind of decision-making, businesses are using the concept of time regarding money. We also learned about budgeting in Chapter 9. Have you developed a budget for your personal income and expenses? Let’s think of something close to home for this week’s discussion forum conversation.
In your initial post, compare the information pertaining to Master Budgets (chapter 9) to your personal budget (you do not need to provide actual number!) If you were to use your personal budget as business managers use the Master Budget, you would probably find some areas where you could save money, or make a change so that you will have more money in the future.
Provide an example of investing in something that will hopefully realize future profits (incorporating alternative energy sources as you build your new home; buying a hybrid vehicle for your next car; switching to a “whole food” diet rather than buying pre-packaged foods). Give enough information in your example so that your peers can address the following questions in their replies.
How did the example illustrate the time value of money concept?
How was the Net Present Value concept illustrated?
How was the payback period determined?