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# The Time Value of Money

### Leasing, Taxes, and the Time Value of Money

The lessor can claim the tax deductions associated with asset ownership and realize the leased asset's residual value. In return, the lessor must pay tax on the rental income. Questions: a. Explain why a financial lease represents a secured loan in which the lender's entire debt service stream is taxable as ordinary inco

### Time Value of Money for Opportunity Cost Rates

What is an opportunity cost rate, is it used in the discounted cash flow analysis, should I show it on my time line and where, and finally is this thing a single number or does it change and if so why?

### Future Value

How much would \$5000 due in 50 years be worth today if the discount rate were 7.5%

### Calculating Future Price

Contract Maturity Data Actual Futures Price January 15 \$105.00 March 15 \$105.10 Suppose the effective annual T-Bill rate is expected to persist at 5% and that the dividend yield is 4% per year. Calculate the "correct" March futures price relative to the January price and comment on any

### Time value of money concept

Write a 200-300 word description of the four time value of money concepts: present value, present value of an annuity, future value , future value of an annuity. Describe the characteristics of concept and give examples of when each would be used.

### Money Multiplier

Suppose the financial institutions are required to keep 11% in reserve and the ratio of individuals' currency holdings to their deposits is 21%. What is the money multiplier ? If the financial institutions suddenly became concerned about the safety of their loans, and they decide to keep 2% excess reserves (reserves held by b

### Interest and the Time Value of Money

Please help with the following: Section 5.1 36, 40, 46, 52 Section 5.2 20, 38, 44, 52, 58, 68 Section 5.3 22, 34, 40 36. Stock Growth A stock that sold for \$22 at the beginning of the year was selling for \$24 at the end of the year. If the stock paid a dividend of \$.50 per share, what is the simple i

### Raising Money for a Wildlife Sanctuary

Using the Change Control Template Document in Appendix D, create a Change Control Document that uses the problem defined in Week 2, and propose a logical change that will fit with your approved project. Raising money for charity for a wildlife sanctuary. This sanctuary will be home to displaced big cats (i.e. lion, tigers).

### Present Value at Optimal Time to Sell

You own 100 acres of timberland, with young timber worth \$20,000 if logged today. This represents 500 cords of wood at \$40 per cord. After logging, the land can be sold today for \$10,000 (\$100 per acre). The opportunity cost of capital is 10%. You have made the following estimates: (i) The price of a cord of wood will inc

### What is the present value of the following future amounts?

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

### Fundamental change in our economy from consumer savings

Do you think this will have an impact on future consumer spending. With the U.S. consumer representing approximately 70% of our GNP - will this fundamentally change our economy if the consumer saves more in the future?

### Time Value Money for Retirement Planning

63. Retirement Planning. A couple will retire in 50 years; they plan to spend about \$30,000 a year in retirement, which should last about 25 years. They believe that they can earn 10 percent interest on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume

### Future value calculation

Misty needs to hav \$15,100 at the end of 2 years in order to fulfill her goal of purchasing a small sailboat. She is willing to invest the funds as a single amount today but wonders what sort of investment return she will need to ear. Figure out the annully compounded rate of return needed if she can invest \$12,500 today. Ann

### Net Present Value of a Airlines Merger

See the attached file. Destination Airlines merges with West World Airlines. Destination Airlines' initial investment for the merger is 1.1 billion. Pessimistic, Most likely, and Optimistic outcomes have been developed by Destination Airlines financial analysts. Initial Investment for Destination Airlines is

### Present value of grandparents trust fund

In 10 years you will begin receiving \$155 dollars per year in perpetuity from your grandparent's family trust fund (first payment is exactly 10 years from today). You consider these payments essentially risk free and have decided to discount them at a constant risk free rate of 6.5%. What is the present value today of these fu

### Time Value of Money

1. You will receive \$5,000 three years from now. The discount rate is 8 percent. a. What is the value of your investment two years from now? Multiply\$5,000 by .926 (one year's discount rate at 8 percent). b. What is the value of your investment one year from now? Multiply your answer to part a by .926 (one year's discount ra

### Finance: intangibles, conflicts of interest, agency costs, NPV, expected payoff, annuity

1. The following are examples of intangible assets except ______. building trade marks patents technical expertise 2. The following are advantages of separation of ownership and management of corporations except ______. corporations can exist forever facilitate tra

### TVM: future value of annuities - Weatherspoon, Lance Armstrong, Bogut, Sonic Foundry

1. Clarence Weatherspoon, a super salesman contemplating retirement on his 55 birthday, decides to create a fund on an 8% basis that will enable him to withdraw \$20,000 per year on June 30th, beginning in 2014 and continuing through 2017. To Develop this fund, Clarence intends to make equal contributions on June 30th of e

### Finance Problems: Time Value of Money (TVM), PV, PVIF, FVIF

3. You will receive \$5,000 three years from now. The discount rate is 8 percent. a. What is the value of your investment two years from now? Multiply \$5,000 _ .926 (one year's discount rate at 8 percent). b. What is the value of your investment one year from now? Multiply your answer to part a by .926 (one year's discount

### Implied Returns: sell 10% ownership for \$100,000 in future payment of 1.5 million

Assume you sell for \$100,000 a 10 percent ownership stake in a future payment one year from now of \$1.5 million. A. What are you saying about the implied return for the 10 percent owner? B. What is the present value of the entire \$1.5 million, using the implied return from Part B? C. What is 10 percent of the value dete

### P6-7 (Time Value Concepts Applied to Solve Business Problems)

P6-7 (Time Value Concepts Applied to Solve Business Problems) Answer the following questions related to Derek Lee Inc. (a) Derek Lee Inc. has \$572,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides \$80,000 at the end of each year for 12 years, and the other is

### Time Value of Money (TVM) role in certain types of liabilities

What role does Time Value of Money (TVM) play in the calculation of certain types of liabilities?

### Unequal Lives: What is the equivalent annual annuity for each machine?

The Perez Company has the opportunity to invest in on of the two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs \$10 million but realizes after- tax inflows of \$4 million per year for 4 years. After 4 years, the machine must be replaced. Machine B costs \$15 mill

### Finance Word Problems: A set of multiple choice questions dealing with earnings per share, future value, present value, financing strategy and permanent funds requirement.

Address the following word problems. Use the charts attached and show your work. 8) A firm had the following accounts and financial data for 2005: Sales Revenue \$3,060 Cost of goods sold \$1,800 Accounts receivable 500 Preferred stock dividends 18 Interest expense 126 Tax rate 40% Total o

### Question about Calculation of earnings per share

Could you explain how to do this? ------------------------- Sales Revenue \$3,060 Accounts Receivable 500 Interest Expense 126 Total operating expenses 600 Accounts payable 240 Cost of goods sold 1,800 Preferred stock dividends 18 Tax rate 40% Number of co

### Time Value of Money -TVM

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.\$

### What is the MRP on 4 year US government securities? Which opportunity will yield the largest amount five years from today? How much money does your aunt have to deposit in the bank today? How much will be in the account after your sister makes the second withdrawal two years from today?

You are given the following information k*= 1% Inflation rate is expected to be 2.5% for the next two years, 3% per year for the following two years, and 3.5% per year thereafter. 5 year US government securities have an interest rate that is 0.2% higher than 4 year US government securities The

### Finance: PV of cash, annuities, FV of uneven cash flow, expected returns, CAPM, SML

Problem: PV of cash Flow stream. A rookie quarterback is negotiating his first NFL contract. His opportunity cost is 10%. He has been offered three possible 4-year contracts. Payments are guaranteed and they would be made at the end of each year. Terms of each contract are as follows: Year 1

### Retirement planning: How much do you have to put into your account at the end of each year to reach your retirement goal?

You are planning your retirement and you come to the conclusion that you need to have saved \$1,250,000 in 30 years. You can invest into an retirement account that guarantees you a 5% annual return. How much do you have to put into your account at the end of each year to reach your retirement goal?