The time value of money is the foundation of for all of finance. Each transaction has a cost associated with it. Take a look at today's interest rates at: http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield.
Choose an apparel company. Imagine the company is planning on building another facility to make garments. This company will need to spend at least $1,000,000.00 to build the plant. The company has decided to take a loan to pay for the plant. The company has the choice of starting construction today or in six months. Looking at today's interest rates, should the company begin construction today or in six months? Also, explain your answer to each of the following questions:
Discuss whether these rates are attractive or not. Do you think these rates are expensive?
? Do you think these rates are cheap?
? How is the time value of money important to the company?
? If the company chooses to wait six-months, what does that say about the company's view on the time value of money?
Please see the attached file(s) for the table.
Operations Management and Time Value of Money
I chose Gap, Inc. (NYSE: GPS) as the apparel company which is planning to build another facility to make garments with a capital budget of at least $1,000,000 for the plant alone. Given that Gap is planning to procure a bank ...
The solution discusses an apparel company planning another facility.