#1. What do we mean by the "time value of money" and why is this concept important to making business decisions?

#2. What is the difference between Present Value and Future Value? Provide examples.

#3. a. Find the Future Value 2 year(s) from now of an investment of $447 today if the interest rate is 13.84% compounded Weekly.

b. Find the Present Value of a 15 year annuity of $371 per six months if the interest rate is 18.57% compounded Semiannually.

c. Find the Future Value 14 year(s) from now of an investment of $979 today if the interest rate is 18.23% compounded Daily.

d. Find the Present Value of a 18 year annuity of $943 per week if the interest rate is 13.95% compounded Weekly.

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#1. What do we mean by the "time value of money" and why is this concept important to making business decisions?

The basic idea behind the concept of time value of money is that a dollar received tomorrow is worth less than a dollar received today. Since, by postponing the receipt of a dollar today to a future date, we are postponing the opportunity to enjoy that dollar. Thus, the actual value of a dollar is constant but depreciates with time. The longer we wait to receive the dollar, the higher is the loss in the value of the dollar. This concept is known as Time value of Money. Since, the value of a dollar received today is higher than that if received next year, the time value of money affects the bottom line of the firms. The later the cash flows from a project are received, the less valuable the cash flows are to the firm.

"Secondly, in order to earn higher profits in future, firm invest the money today. They should earn a positive return on that money ...

Solution Summary

This post discuss about time value of money, present value, future value and shows also how to calculate them

5. (Computation of FutureValues and PresentValues) Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.)
a. What is the futurevalue of $7,000 at the end of 5 periods at 8% compounded interest?
b. What is the presentvalue of $7,000 due 8 periods hence, disc

1.How are compounding and discounting related?
please describe what compounding is. Also, describe what discounting is. Feel free to provide examples.
2.Describe time value of money.
What is it? How do we use it?
Please analyze the question and provide examples.

1. A firm is expected to earn $10,000, $25,000, $48,000, and $75,000 during the next four years, after which it will be dissolved. What is the presentvalue of the firm if the discount rate is 8%?
Please show work and explain rationale.

The futurevalue of an amount of money is said to be the value of the amount of money that
is allowed at an interest rate over time, and is given by the formula:
FV = PV(1 + i)n
where:
FV = futurevalue
PV = presentvalue
i = the interest rate
n = the number of years (periods)
Find the presentvalue that will have prod

What is the difference between present and futurevalues? How would you use present and futurevalue techniques in preparing a financial retirement plan? How would various required rates of return affect the decision? Explain your answer.

Discuss the time value of money and why this is important. Define the following terms in detail.
· PresentValue
· FutureValue
· Net Present Cost
· Annualized Cost

What is the relationship between the PVIFi,n (Table 5-4) and the PVIFAi,n (Table 5-8)? What is the PVIFA10%,10yrs? Add up the values of the PVIF10%,n for n = 1, ..., 10. What is this value? Why do these values have the relationship they do?
Please see the attached Tables