Docx.

Financial managers make decisions today that will affect the firm in the future. The dollars used foe investment expenditures made today are different from the cash flows to be realized in the future. What are these differences? What are some of the techniques that can be used to adjust for these differences?

In the U. S. and in other market economies, financial firms and markets channel savings into capital investments. Financial markets, and the economy as a whole, work much better when the value of the dollar is stable, experiencing neither rapid inflation nor deflation. In the U. S., the Federal Reserve System functions as the central banking institution. It has the primary responsibility to keep the right amount of money circulating in the economy. Investments are one of the most important ways that economies are able to grow over time. Investments allow businesses to purchase factories, machines, and other capital goods, which in turn increase the production of goods and services and thus the standard of living of those who live in the economy. That is especially true when capital goods incorporate recently developed technologies that allow new goods and services to be produced, or existing goods and services to be produced more efficiently with fewer resources. Investing in capital goods has a cost; however, for investment to take place, some resources that could have been used to produce goods or services for consumption today must be used, instead, to make the capital goods. People must save and reduce their current consumption to allow this investment to take place. In the U. S. economy, these are usually not the same people or organizations that use those funds to buy capital goods. Banks and other financial institutions in the economy play a key role by providing incentives for some people to save, and then lend those funds to firms and other people who are investing in capital goods (Angel fire, ND).

Interest rates are the price that someone pays...