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Choices Involving Time 10 Learning Objectives After reading this chapter, students should be able to: } Explain how consumers and fi rms move cash from one point in time to another by borrowing and lending. } Calculate the present discounted value of a claim on future resources. } Understand consumers’ decisions regarding saving and borrowing. } Analyze the profi tability of investment projects with future cash fl ows. } Explain how saving, borrowing, and investment depend on the interest rate. n the 1990s, Volkswagen executives set their sights on the market for luxury automobiles. They con- I ceived both a new car—the Phaeton—and a state- of-the-art production facility in Dresden, Germany. Eager to impress well-heeled customers, they located the new plant along the banks of the historic Elbe River, on more than 20 acres of manicured parkland. With walls of glass—roughly 290,000 square feet in all—and fl oors of polished Canadian maple, it was easily mistaken for an art gallery. In fact, after the Dresden Opera House fl ooded, 17 performances of the opera Carmen were held in the factory’s sumptuous visitor’s center. Like Rome, the Phaeton plant wasn’t built in a Interior (above) and exterior (below) of Volkswagen’s Phaeton production plant day. The fi rst Phaeton didn’t hit the streets of Europe in Dresden, Germany 325 326 Part II Economic Decision Making until 2002. Volkswagen sank more tha