Explain the concept of the present value of future profits and explain the role it plays in the theory of investment expenditure. In the light of your explanation briefly comment on why the relationship between investment expenditure and the economys interest rate on bonds might appear to be a weak one. The present value of future profits can be used when businesses make decisions involving investments in terms of real assets such as new plant, machinery, buildings and similar long-term assets. To assess whether investment ideas are wealth-creating, shareholders or managers must take future cash flow and time-value of money into account. So, in this essay, I am going to explain the present value first and the fundamental role it plays in the decision-making which it contributes to investment expenditure in the whole economy. Finally, the relationship between investment expenditure and interest rate on bonds will be identified to find out if they are closely correlated or not. In fact, the present value of future profits is something related to the time value of money. The......

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