The financial manager at starbuck industries is considering an investment that requires an initial outlay of $25,000 and is expected to result in cash inflows of $3,000 at the end of year 1, $6,000 at the end of years 2 and 3, $10,000 at the end of year 4, $8,000 at the end of year 5, and $7,000 at the end of year 6.
a) draw and label a time line depicting the cash flows associated with starbuck industries' proposed investment.
b) use arrows to demonstrate, on the time line in part a, how compounding to find future value can be used to measure all cash flows at the end of year 6.
c) use arrows to demonstrate, on the time line in part b, how discounting to find present value can be used to measure all cash flows at time zero.
d) which of the approaches-future value or present value- do financial managers rely on most often for decision making? why?

The monthly demand equation for an electric utility company is estimated to be p equals 60 minus left parenthesis 10 superscript negative 5 baseline right parenthesis x, where p is measured in dollars and x is measured in thousands of killowatt-hours. the utility has fixed costs of $3 comma 000 comma 000 per month and variable costs of $32 per 1000 kilowatt-hours of electricity generated, so the cost function is upper c left parenthesis x right parenthesis equals 3 times 10 superscript 6 baseline plus 32 x. (a) find the value of x and the corresponding price for 1000 kilowatt-hours that maximize the utility's profit. (b) suppose that the rising fuel costs increase the utility's variable costs from $32 to $38, so its new cost function is upper c 1 left parenthesis x right parenthesis equals 3 times 10 superscript 6 baseline plus 38 x. should the utility pass all this increase of $6 per thousand kilowatt-hours on to the consumers?