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# The Time Value of Money

### Financial Accounting

A. After a protracted legal case, Joe won a settlement that will pay him \$11,000 each year at the end of the year for the next ten years. If the market interest rates are currently 5%, exactly how much should the court invest today, assuming end of year payments, so there will be nothing left in the account after the final payme

### Finance: Annuities, Time Value of Money, PV, FV, PVA, FVA Bonds

1. Lyle O 'Keefe invests \$30,000 at 8% annual interest, leaving the money invested without withdrawing any of the interest for 8 years. At the end of the 8 years, Lyle withdrew the accumulated amount of money. A) Compute the amount Lyle would withdraw assuming the investment earns simple interest. B) Compute the amoun

### Best Choice of Investment

1. If you require a 12 percent return on your investment, which would you prefer? a. Present value of \$8,000 today b. Present value of \$15,000 received in 5 years at 12% c. Present value of a 15 year, \$1,000 annuity at 12%: Explain what is the best choice and why it is the best.

### Time value of money, and how does it apply to this situation

You are considering expanding your line of equipment and apparel for high school athletic teams to include soccer teams. Based on research conducted by the marketing department, you estimate an increase in sales for your division of \$150,000 per year for the first 2 years, and then \$250,000 per year over the following 3 years. T

### How do I determine the IRR and EAR using Excel?

1) You are considering buying an expensive Fancycar MSRP \$99,000. The dealer has offered you 2 alternatives for purchasing the car: a. You buy the car for \$90,000 I cash and get a \$9,000 discount b. You can buy the car for \$99,000 with a down payment of \$39,000. The balance is a zero interest loan to be paid back in 36 equal

### Calculate amount of the payments required to reach goal

Today is Sarah's 30th birthday. Five years ago, Sarah opened a brokerage account when her grandmother gave her \$25,000 for her 25th birthday. Sarah added \$2,000 to this account on her 26th birthday, \$3,000 on her 27th birthday, \$4,000 on her 28th birthday, and \$5,000 on her 29th birthday. Sarah's goal is to have \$400,000

### Treatment of allocated costs: American Cancer Society ACS as example

Retrieve ACS financials (attached) and note how they allocates common costs to a division, product, or service. Recast that report with unallocated costs and comment on the usefulness of that revised report. If you cannot identify specific actual amounts, make reasonable estimates for the report. When you make estimates indi

### Present Value and Multiple Cash Flows: Which investment has the higher present value

Investment X offers to pay you \$5,500 per year for nine years, whereas Investment Y offers to pay you \$8,000 per year for five years. Which of these cash flow streams has the higher present value if the discount rate is 5%? If the discount rate is 22%?

### Calculating present value of a stream of cash flows

What would be the present value of receiving \$100, \$200, \$300, at the end of 1, 2, 3 years respectively at 8% annual compound interest. Do not use MS Excel or present value tables. Please provide formulas/calculations for your response.

### Future Value of Annual Deposits

Suppose you wish to set aside \$2,000 at the end of each of the next 10 years in an account paying 12% compounded annually. You accumulate at the end of 10 years an amount closest to what? Also, please provide formula.

### Time Value of Money and its sub-concepts (Present Value, Future Value, Present Value of Annuity and Future Value Annuity) explained with examples.

Describe the four time value of money concepts - present value, present value of an annuity, future value, and future value of annuity. Describe the characteristics of each concept and give an example of how each one would be used.

### Time Value of Money

Suppose you are a loan officer for a bank. A start-up company has qualified for a loan. You are pondering various proposals for repayment: 1. Lump sum of \$500,000 four years hence. How much will you lend if your desired rate of return is: a. 12%, compounded annually? b. 16%, compounded annually? 2. Repeat number 1, but

### Finance: Simple NPV; time value of money

Johnny has a technology that will be available in the near term. He anticipates his first annual cash flow from the technology to be \$215,000, received two years from today. Subsequent annual cash flows will grow at 4% in perpetuity. What is the present value of the technology if the discount rate is 10%? What is the relati

### Finding Present Value of multiple cash flows

Seaborn Co. has identified an investment project with the following cash flows. If the discount rate is 10 percent, what is the present value of these cash flows? What is the present value at 18% ? At 24%? Year 1 950 Year 2 1040 Year 3 1130 Year 4 1075

### Warehouses of the Future: trends in logistics, distribution centers, Kroger's system

Read the below articles. Harrington, Lisa, (2007 May) Designing the Perfect Warehouse, Inboundlogistics.com, assessed Oct. 5, 2009. Bob Trebilcock, (2008, Jan) The Multi-Modal Warehouse, Modern Materials Handling (Warehousing Management Edition) Boston: Vol. 63, Iss. 1, pg 40, 1 pgs. David Drickhamer, (2006, Feb) Chang

### Libraries of the Future: What do libraries do; worth the cost; Thomas Frey's view

Given emerging information technology, there is controversy about the continuing viability of this marketing concept. One view of how the concept may continue to evolve is from a renowned futurist, Thomas Frey. Using the following websites: (miami dade) http://www.mdpls.org/; http://www.davinciinstitute.com/page.php?ID=120

### Amount to be drawn from great grandfather's annuity

Problem At the end of 1922, your great grandfather (g.g.f.) established a trust fund to be used in order to help a later generation of the family obtain a university education. The ultimate beneficiary of the trust is required to draw the trust's balance in 36 equal monthly instalments starting at the beginning of the first y

### Finance: Calculate the Interest Rate for Two TVM Problems

Find the interest rate (or rate of return) in each of the following situations. You borrow \$85,000 and promise to pay back \$201,229 at the end of 10 years. You borrow \$9,000 and promise to make payments of \$2,684.80 at the end of each of the next 5 years.

### Time value of Money: Evaluate offered securities by brokerage firm; What is PV?

Assume that you inherited some money. A friend of yours is working as an unpaid intern at a local brokerage firm, and her boss is selling securities that call for 4 payments, \$50 at the end of each of the next 3 years, plus a payment of \$1,050 at the end of Year 4. Your friend says she can get you some of these securities at a

### Inflation and future value

As part of your financial planning, you wish to purchase a new care exactly 5 years from today. The car you wish to purchase costs \$14,000 today, and your research indicates that its price will increase by 2 percent to 6 percent over the next 5 years. a) estimate the price of the car at the end of 5 years if inflation is (1

### Atlas Home Supply: Current value per share

Atlas Home Supply has paid a constant annual dividend of \$2.40 a share for the past 15 years. Yesterday, the firm annunced the dividend will increase next year by 10 percent and will stay at that level through year three, after which time the dividends will increase by 2 percent annually. the required return on the stock is 12 p

### Accounting II: Define Time value of money, future value and present value

1. Your friend says, 'I just got out of an accounting lecture about future value and present value. Frankly, I don't have a clue what the professor was talking about, and we have a quiz on Wednesday. Help!'What would you tell your friend? How would you help him/her out? Clearly and concisely explain what is meant by the time v

### Finance: Time value of money for \$100,000 investment today

If you invest \$100,000 today at 12% per year over the next 15 years, what is the most you can spend in equal amounts out of the fund each year over that time.

### Future value of \$1,500 after 5 years if the interest rate is 12%, compounded monthly?

What's the future value of \$1,500 after 5 years if the appropriate interest rate is 12%, compounded monthly? a) \$1,922.11 b) \$2,725.05 c) \$2,600.11 d) \$2,230.66 e) \$2,342.19

### Time Value of Money

You are interested in saving money for your first house. Your plan is to make regular deposits into a brokerage account which will earn 14 percent. Your first deposit of \$5,000 will be made today (January 1st). You also plan to make four additional deposits at the beginning of each of the next four years. Your plan is to inc

### Four questions using the time value of money concepts

1. Compute the time it takes to save \$10,000 if you know you can save \$300 per month in a bank account paying 10 percent interest. 2. Compute the amount of money you need to invest today to have a balance of \$10,000 10 years from now in a bank account expected to earn 10 percent interest. 3. You are saving \$300 per month i

### Explain TVM concept in buying a car with zero down and zero interest rate

How is a car loan an example of TVM? Under what circumstances should an individual take out a loan versus pay all cash? How have recent zero \$ down and zero % interest for 12 months or more affected potential cash buyers?

### Time Value of Money

A new labor contract has been signed, my company has agreed to make a one-time contribution of Euros 1,000,000 to the construction of a new physical fitness facility for its employees. This amount will be placed in an account earning 2%. When the account grows to Euros 1,850,000, construction will commence. How long must the emp

### Accounting and the time value of money

E6-3 (Computation of Future Values and Present Values) Using the appropriate interest table, answer each of the following questions. (Each case is independent of the others.) (a) What is the future value of \$7,000 at the end of 5 periods at 8% compounded interest? (b) What is the present value of \$7,000 due 8 periods hence, di

### Future Value of an Ordinary Annuity..

Dan plans to fund his IRA with a contribution of \$2,000 at the end of each year for the next 10 years. If he earns 10% on his contributions how much will he have at the end of the 10th year. A. \$12,290 B. \$51,880 C. \$31,874 D. \$20,000