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# The Time Value of Money

### Future Value of an investment

I'm having a hard time understanding future value. Can I please get a simple answer for the following? Discuss the positive and negative effects of the future value of an investment, for a duration of a) a single period and b) a double period. Discuss the good effects and ill effects that a future value of an investment will

### Taxation I

Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Kenâ??s modified adjusted gross income for purposes of the bond interest exclusion and for determining the taxabili

### TVM

1. 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

### Time value of money fundamental in investment analysis

Discounted cash flow analysis is also called time value of money analysis. It is the technique to covert a cash flow amount occurring at one time point into a cash flow amount occurring at another time point with the equivalent value. It is said that this technique is fundamentally important in any investment analysis, particula

### Present Value Layout Explanations

You are a financial analyst in corporate treasury. The company is prepared to go forward with a \$50 million bond issue. The term is 20 years, coupon 5.56 percent (paid semiannually), and \$1,000 face value per bond. As is customary, on the day of the issue, the investment banker's call with any updated information on the market b

### Time Value: Value That Alternative Option

You are an investment manager and a client wants to know the lump sum he would need to deposit today to receive a \$35,000 supplement retirement annuity for 15 years beginning when he retires in 20 years. Looking at his investment options, you expect an average annual return on the annuity of 8 percent. How else could you stru

### Interest Rates and Time Value of Money

Can you help me understand these problems? #6 Suppose the risk-free interest rate is 4% a. having \$200 today is equivalent to having what amount in one year? b. having \$200 in one year is equivalent to having what amount today? c. Which would you prefer, \$200 today or \$200 in one year? Does your answer depend on when

### Time value of money: Calculate the future value of \$2000

3. Calculate the future value of \$2000 in a. Five years at an interest rate of 5% per year b. Ten years at an interest rate of 5% per year c. Five years at an interest rate of 10% per year d. Why is the amount of interest earned in part (a) less than half the amount of interest earned in part (b)?

### Finance questions: compound interest, TVM and more

Problems with annuities and compound interest. Thank you so much for helping me get started! ============== 4-6A. (Cash budget) The Sharpe Corporation's projected sales for the first eight months of 2004 are as follows: January \$ 90,000 May \$300,000 February 120,000 June 270,000 March 135,000 July 225,000

### Time Value of Money: Bill's project investment; Jill's endowment

1) Bill has the chance to invest in a project that will generate year-end cash inflows of \$1,500 each year for 2 yrs, \$2,000 for each of the next 3 yrs, and \$5,000 at the end of year 6. The required rate of return is 13.5% compounded annually. If the cost to invest in this project is \$8,200, what is the Net Present Value of th

### Time Value of Money: What would Jon pay for cash stream

If Jon received an annual \$75 payment indefinitely and the market rate of interest for these types of payments is 8%, what is the price Jon would pay for this stream? What is the end value of investing \$5,000 for 14 months at an annual interest rate of 6% compounded monthly? If Cindy begins making quarterly investments of

### Future and Historical Costs

'Any future cost is relevant'. Do you agree? Explain. Why are historical or past data irrelevant to special decisions?

### Time Value of Money and calculating future value

Can you help me get started with this assignment? 1. In two to three paragraphs, explain why the concept of present value is so important for corporate finance and is often the very first topic taught in any finance class. Do not focus your answer on explaining what present is, instead focus on some specific reasons why you

### Formula for PV of a future balloon payment

When the Federal Reserve notifies banks that they must hold fifteen cents for every dollar that is deposited, it is controlling the money supply by using which of the following tools? A. discount rate B. open market operations C. reserve requirements ratio D. risk E. unable to tell with the information provided Y

### Time Value of Money / Effective Rate of Interest

Mr. Jones borrows \$2,000 for 90 and pays \$35 interest. What is his effective rate of interest? a. 9.3% b. 7% c. 11.7% d. None of these If you invest \$8,000 at 12% interest, ho much will you have in 7 years? a. \$18,016 b. \$17.688 c. \$3,616 d. \$80,712 How much must you invest at 10% interest in order to see you inv

### Compund annuity: accumulated sum of each of the following streams of payments?

What is the accumulated sum of each of the following streams of payments? a. \$500 a year for 10 years compounded annually at 5 percent b. \$100 a year for 5 years compounded annually at 10 percent c. \$35 a year for 7 years compounded annually at 7 percent d. \$25 a year for 3 years compounded annually at 2 percent

### Calculate the Present Value in four situations following

What is the present value of the following future amounts? a. \$800 to be received 10 years from now discounted back to the present at 10 percent b. \$300 to be received 5 years from now discounted back to the present at 5 percent c. \$1,000 to be received 8 years from now discounted back to the present at 3 percent d. \$1,000

### Study Questions

Please see the attachment. 11. What is the future value in three years of \$1,000 invested in an account with a stated annual interest rate of 8%, (a). Compounded annually? (b). Compounded semiannually? (c.). Compounded monthly? (d). Compounded continuously? (e). Why does the future value increase as the compounding

### Your uncle has \$300,000 invested at 7.5%, and he now wants to retire...

Your uncle has \$300,000 invested at 7.5%, and he now wants to retire. He wants to withdraw \$35,000 at the beginning of each year, beginning immediately. He also wants to have \$25,000 left to give you he ceases to withdraw funds from the account. For how many years can he make the \$35,000 withdraws and still have \$25,000 l

### Keystrokes for BA II for retirement withdrawal amount

(Please show answers, and key strokes for BA II Plus Professional calculator from Texas Instruments.) Your sister turned 35 today, and she is palnning to save \$5000 per year for retirement, with the first deposit to be made on year from today. She will invest in a mutual fund that will provide a return of 8% per year. She p

### Keystrokes for cash flow at the end of the final four years

(Please show answers, and key strokes for BA II Plus Professional calculator from Texas Instruments.) You are negotiating to make a 7-year loan of \$25000 to Berk Inc. To repay you, Berk will pay \$2500 at the end of Year 1, \$5000 at the end of Year 2, and \$7500 at the end of Year 3, plus a fixed but currently unspecified cash

### Time Value of Money Relationships

In accounting, the term "time value of money" is used to indicate a relationship between time and money. What is the difference in simple versus compound interest? Discuss why accountants should have an understanding of compound interest, annuities, and present value concepts. So what you can do is go over the present, future

### Future and present value problems: Dwayne Wade, Serena Williams, Rex Walters

Presented below are three unrelated situations. (a) Dwayne Wade Company recently signed a lease for a new office building, for a lease period of 10 years. Under the lease agreement, a security deposit of \$12,000 is made, with the deposit to be returned at the expiration of the lease, with interest compounded at 10% per year

### Personal Finance Concepts

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 10 year If the market interest rates are currently 5% exactly how much should the court invest today assuming end of year payment so there will be nothing left in the account after the final payment is made?

### MBA Finance

1. Your brother has offered to give you \$100, starting next year, and after that growing at 3% for the next 20 years. You would like to calculate the value of this offer by calculating how much money you would need to deposit in the local bank so that the account will generate the same cash flows as he is offering you. Your loca

### The key to operating a real estate business is having a firm system in place to keep you on track and prevent you from becoming overwhelmed or, worse, overlooking critical details that might cost you money or diminish your professional credibility. The first area of business would be to hire the right assistants that can ensure day-to-day business activities are handled in a more effective and time efficient manner:

This is a step-by-step fundamenThe key to operating a real estate business is having a firm system in place to keep you on track and prevent you from becoming overwhelmed or, worse, overlooking critical details that might cost you money or diminish your professional credibility. The first area of business would be to hire the

### Statement of Cash Flows and Time Value of Money

Please help me solve the following problems related to the statement of cash flows: 1. The Newsome Corp conducted the following activities in 2009: Sold 10,000 stock shares for \$20.00 per share; Issued bonds for which they received \$500,000; Paid dividends to their stockholders totaling \$85,000; Sold equipment for \$50,000

### Time Value of Money Explanation

Time Value of Money Scenario 1 The Children's Hospital of Philadelphia (C.H.o.P) is considering adding a da Vinci robot to their Operating Room suites. The purpose of the acquisition is to facilitate more urologic cases hence deriving more income. Since most urological cases are done on an outpatient basis this initiative

### Estimated intrinsic value per share

6. You have been assigned the task of using the free cash flow model to estimate Petry Corporation's intrinsic value. Petry's WACC is 10.00%, its end-of-year free cash flow (FCF) is expected to be \$150.0 million, the FCFs are expected to grow at a constant rate of 6.00% a year in the future, the company has \$200 million of long-