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# The Time Value of Money

### Capital Investment Decisions for Magnificent Modems, Inc.

Magnificent Modems, Inc. (MMI), has several capital investment opportunities. The term, expected annual cash inflows, and the cost of each opportunity are outlined in the following table. MMI has established the desired rate of return of 16 percent for these investment opportunities. Opportunity A B

### Should the top executives of the major banks that received bail-out money be allowed to receive large bonuses?

Should the top executives of the major banks that received bail-out money be allowed to receive large bonuses? Be sure to clearly identify the utilitarian and deontological implications of your position. Be clear how your answer respects basic rights and has consequences that are for the greatest good.

### Opportunity Costs, Cost of Capital, Interest Compounding Periods

A. Read the statements below and write your comments to it, need to support your writing (references). 1. Opportunity cost of finance - The cost of capital is an opportunity cost of finance, because it is the minimum return which an investor requires. 2. The cost of capital has two aspects to it - The cost of funds that a

### Finance Questions: Time Value of Money

Application # 28 You're trying to save up for a long and expensive vacation. You want to take a trip to Europe when you graduate in three years. Considering how much more expensive is the Euro (?) to the U.S. Dollar (\$), and if you can earn 15% on your investments, how much would you have to deposit in order to have \$30,000 whe

### Calculating present and future values..

Q12 What is the economic value today of each of the following payment streams if money can earn 7.5%. a. \$1000, \$3000, and \$2000 due in one, three, and five months, respectively. b. Two \$3000 payments due two and four months from now. Q14 Ninety days ago Stella signed an agreement with Manon requiring her to make three

### Finance Problem: Choosing between Two Options

Sharon Smith will receive \$1 million in 50 years. The discount rate is 14. As an alternative, she can receive \$2,000 today. Which should she choose? Provide two solutions for this question ( Base your answer on present value calculations for the \$1 million, and future value calculations for the \$2,000.

### Calculating Net Worth per Share: Hoover Inc. Example

Question: Hoover Inc. has current assets of \$360,000 and fixed assets of \$640,000. Current liabilities are \$90,000 and long-term liabilities are \$160,000. There is \$90,000 in preferred stock outstanding and the firm has issued 10,000 shares of common stock. Compute the book value (net worth) per share.

### Time Value of Money

A1. (PV and FV of single payments) Fill in the missing information: PV FV r n a. - 20 10% 10 b. 10 - 10% 10 c. 10 20 - 10 d. 10 20 10% - A2. (PV and FV of single payments) Fill in the missing information: PV FV r

### Economic Future

Larson Inc. Larson Inc. is an international company that has operated in America for 5 years and in Germany for over 15 years. The company supplies batteries for electronic equipment. Batteries are sold for anything from laptops to toys. The company has always maintained a decentralized structure regarding decisions in the ar

### Time Value of Money: Example

1.) You need \$25,000 today and have decided to take out a loan at 7 percent for five years. Which one of the following loans would be the least expensive? Assume all loans require monthly payments and that interest is compounded on a monthly basis. 2.) You grandfather won a lottery years ago. The value of his winnings at the

### Liability Insurance Policy

4. If a firm wants to have \$1 million in cash available in three years, how much must it invest now at an 8 percent interest rate? 5. An insured has the following four liability insurance policies: \$300,000 with insurer A, \$300,000 with insurer B, \$700,000 with insurer C, and \$900,000 with insurer D. Each policy apportions l

### Time value of money

P4-11 Present Values. For each of the cases shown in the following table, calculate the present value of the cash flow, discounting at the rate given and assuming that the cash flow is received at the end of the period noted. Case Single Cash flow Discount rate End of period (years) A \$7000

### Time value of money

Problem 1 Paul wants to save money for his son's education and for his own retirement. His son jimmy. Who is now 10 yrs old will need \$25,000 a year for 4 yrs when he starts college 8 yrs from now. Paul, who is now 40 yrs old, he plans to retire at 60 years of age with an annual retirement income of \$60,000 a year and he expec

### Calculating Annual Rate of Return

Three years ago, Frank signed a 5 year promissory note for \$10,000 plus interest at 12% compounded monthly. a) Helen is willing to pay \$13,000 for the note. Calculate Helen's annual rate of return compounded quarterly?

### case problem

you have applied for a job at a local bank. as part of its evaluation process, you must take an examination on time value of money analysis covering the following... b. 1) whats the future value of \$100 after 3 years if it earns 10% annual compounding? 2) whats the present value of \$100 to be received in 3 years if the

### Time Value of Money Concepts

Problem 4.4 For each of the cases shown in the following table, calculate the future value of single cash flow deposited today that will be available at the end of the deposit period if the interest is compounded annually at the rate specified over the given period. Case Single Cash Flow Interest Rate Deposit

### Time Value of Money

1.) Sue and Neal are twins. Sue invests \$5,000 at 7 percent when she is 25 years old. Neal invests \$5,000 at 7 percent when he is 30 years old. Both investments compound interest annually. Both Sue and Neal retire at age 60. Which one of the following statements is correct assuming that neither Sue nor Neal has withdrawn any mon

### Time Value of Money

You can insulate your home for \$7,500. You figure you can save 15% per year on your heating bill if you insulate. Your home was bought 10 years ago for \$45,500. You figure real estate prices have gone up 16% each year. You plan to live in the house another 10 years. Your home has five bedrooms, 2,500 square feet and requires 5,5

### Time Value of Money: eBay

Time Value of Money Your task for this module is to apply the concept of present value to eBay. Suppose eBay is selling a bond that will pay you \$1000 in one year from today. Keep in mind that if your company has financial difficulties in one year you might not get your full \$1000 back. Given that a dollar one year from no

### Finance: Warrant, contracts, conversion, premium, basic EPS, derivative, option

See attached file. Question 1 Warrants are long-term options to sell shares of the issuing firm's stock. fairly stable, low-risk investments. investments whose value is directly related to the price of the underlying stock. structured to sell for precisely their intrinsic value. Question 2 A contract giving the owne

### Time Value of Money Problems

Please help me understand what type of specific TVM problem each of the problems from 1 to 10 are and give the formulas required to solve each. l will work out the calculations. For problems 11 and 12, please help me see the work for the complete problem including the calculations and everything. 1. First Bank and Trust of

### Present value of three pension plans

Juanita Martinez is ready to retire and has a choice of three pension plans. Plan A provides for an immediate cash payment of \$200,000. Plan B provides for the payment of \$20,000 per year for 10 years and the payment of \$200,000 at the end of year 10. Plan C will pay \$35,000 per year for 10 years. Juanita Martinez d

### Discuss the changing factors that will influence business in the future

Discuss the changing factors that will influence business in the future (e.g., new investment techniques, new forms of communication, new management structure, new technology, and new marketing techniques). Explain in detail the factor that was chosen. Discuss any additional ideas that you may have about how future business wi

### Present a time series plot and discuss its message

Find an example of a time series plot presented in a newspaper, magazine, journal, or web site. Discuss the plot based on the information given and comment on what you learned from the plot.

### Time value of money

Find the present value and the amount of interest earned. Use the present value of a dollar table. Round to the nearest cent as needed. Amount needed \$11,200 Time (years) 10 Interest 4% Compounded semiannually Present value \$ ____

### Time value of money

Find the present value and the amount of interest earned. Use the present value of a dollar table. Round to the nearest cent as needed. Amount needed \$12,900 Time (years) 6 Interest 8% Compounded annually Present value \$ ____________ Interest earned \$____________

### Present Value of Bonds and Time Value of Money

Apply the concept of present value to Accuracy. Suppose Accuracy is selling a bond that will pay you \$1000 in one year from today. Keep in mind that if Accuracy has financial difficulties in one year you might not get your full \$1000 back. Given that a dollar one year from now is always worth less than a dollar today, you most

### Factor in different future and present values

Which factor would be greater: the present value of \$1 for 10 periods at 8% per period or the future value of \$1 for 10 periods at 8% per period? a. Future value of \$1 for 10 periods at 8% per period. b. Present value of \$1 for 10 periods at 8% per period. c. The factors are the same. d. Need more information

### Chief financial officer must evaluate finances for departments

1. A chief financial officer must evaluate finances for all departments, and create a budget that will include capital expenditures, investments, and future revenues. Define the difference between forecasting and budgeting. What is the difference between an operating budget and a cash budget? 2. How do you explain the use

### Financial Management

Al Corbin is 25 years old today and he wishes to accumulate enough money over the next 35 years to provide for a 20 year retirement annuity of \$100,000 at the beginning of each year, starting with his 60th birthday. He can save \$2,000 at the end of each of the next 10 years and \$3,000 each year for the following 10 years. How mu