Final answer:
The student is considering investment analysis techniques for a business finance question. Present Value, Future Value, Net Present Value, and Internal Rate of Return are the methods to evaluate the proposed $150,000 investment in machinery, requiring information on future cash flows and the use of a 10% discount rate.
Step-by-step explanation:
The student is dealing with evaluation of investment decisions in the field of business finance. Specifically, they are looking at methods such as Present Value (PV), Future Value (FV), Net Present Value (NPV), and Internal Rate of Return (IRR).
Present Value (PV)
The Present Value is the current value of future cash flows discounted at an appropriate discount rate. In this case, a $150,000 investment in machinery is being considered. We would need the timing and amount of future net cash flows to calculate this.
Future Value (FV)
Future Value is the value of cash flows at a specific point in the future when invested at a certain interest or growth rate. It can be calculated using the formula: Future Value received years in the future = (1 + Interest rate)number of years t.
Net Present Value (NPV)
Net Present Value is calculated by taking the present values of expected future cash flows and subtracting the initial investment amount. If NPV is positive, it typically indicates that the investment is expected to yield a return above the discount rate.
Internal Rate of Return (IRR)
The Internal Rate of Return is the discount rate that makes the NPV of all cash flows from a particular project equal to zero. It's often used to evaluate the attractiveness of a project or investment. To find the IRR, one would normally use financial calculators or software as there is no straight formula for its calculation.