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    The Time Value of Money

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    Importance of TVM concepts: Calculate future value, present value problems

    1) Why the concept of present value is so important for corporate finance and is often the very first topic taught in any finance class. 2) Calculate the future value of the following: a. $15,000 if invested for five years at a 7% interest rate b. $19,500 if invested for three years at a 4% interest rate c. $29,900 if inv

    Finance: Solving for the unknown using TVM calculations

    Solving for variable other than present value or future value. 35. You are saving money for retirement. To live comfortably, you decide you will need to save $2 million by the time you are 65. Today is your 30th birthday, and you decide, starting today and continuing on every birthday up to and including your 65th birthday, t

    Finance Problems

    1. Starlight, Inc. must choose between two asset purchases. The annual rate of return and related probabilities given below summarize the firm's analysis. Asset A Asset B Rate of Return Probability Rate of Return Probability 8% 40% 7% 30% 1

    Time value of money in decision making

    Please help with the following problem. I need help in explaining why the time value of money is important in making economic decisions. Keeping to the basic of using to the two most common tools of Net Present Value and Pay period used in business to incorporate into the time value of money into operational decision making

    Scenario #1 Restaurant/Bar: Lou and Jose plan to open a sports bar and restaurant where customers socialize and watch sporting events on large-screen TVs that hang around the bar. They do not have much money, but they do have Miriam, a wealthy investor who does not have time to participate in the business, but wants to provide capital to start the business in return for a percentage ownership.

    The business entity that represents the best choice for each business Taking control Taxation Take liability issues into consideration. Identify laws and regulations each business must consider in starting the business Identify risks against which each business must protect itself Identify and discuss the employment laws

    Determining Normal and Standard Time

    See attached file. The results of a time study to perform a quality control test are shown in the following table (see attached). On the basis of these observations, determine the normal and standard time for the test, assuming a 23% allowance factor. a) What is the normal time? b) What is the standard time?

    How Long to Double or Quadruple Initial Deposit

    Please explain step-by-step how to solve this problem. P4-3 Future value tables. Use the future value interest factors in Appendix Table A-1 in each of the cases shown in the table on the facing page to estimate, to the nearest year, how long it would take an initial deposit, assuming no withdrawals, a. To double. b. To q

    Time Value of Money for Savings Accounts

    Could someone please help me with this problem? Sarah Jones has $10,000 that she can deposit in any of three savings accounts for a 3-year period. Bank A compounds interest on an annual basis, bank B compounds interest twice each year, and bank C compounds interest each quarter. All three banks have a started annual interest

    TVM concepts

    1. Calculate the present value of $90,000 to be received 14 years from now if the decision makers opportunity cost 10 percent. 2. Find the present value at 9 percent of each of the following five cash inflow streams. Assume that cash inflows occur at the end of the year. Year A

    Present Value of Future Bank Accounts and Gold Mine Income

    A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%? B. Suppose you have two bank accounts, one called Account A and

    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

    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