From the course: Corporate Finance Foundations

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Capital budgeting overview

Capital budgeting overview

From the course: Corporate Finance Foundations

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Capital budgeting overview

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- I have here a special little machine. - Okay, well what does it do? - It creates money. - Okay, money. How much money? - This little machine here creates exactly one US dollar per year, completely legal. The dollar bill pops out of this hole at midnight on December 31st, every year. - Okay, are you sure this is legal? - Absolutely. Now the question is, how much would you pay me to buy this dollar bill machine? - It's a dollar a year. Okay, how long is it going to last? - Well, that there is the good news. This little machine is guaranteed to last one billion years. - Billion? - In its useful lifetime, this machine will produce a total of one billion dollars. - A billion dollars? That's impressive. - So much how are you going to pay me for this billion dollar machine? Will you pay me a billion dollars for it? - No. - Why not? You will completely recover your billion dollar investment over the life of…

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