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The Time Value of Money

Managerial finance: Time value of money, WACC. Impact the decision to expand.

You estimate an increase in sales of 150,000 per year for the first two years, then 250,000 per year over the following 3 years. You will need to invest in 300,000 worth of new equipment. What is the time value of money and how does it apply in this situation? What is the weighted average cost of capital and how does it impact t

Calculating Future Value and Present Value

Calculate the future value of $150,000 fifteen year from today based on the following interest: a. 3% b. 6% c. 9% d. 12% Calculate the present value of $35,000. 20 years from today based on the following annual discount rates: a. 3% b. 6% c. 9% d, 12%

Operating Cash flow, Contribution Margin, TVM questions

1) Michelle electrical is evaluating a project which will increase sales by $50,000 and costs by $30,000. The project will cost $150,000 and be depreciated straight-line to a zero book value over the 10 year life of the project. The applicable tax rate is 34%. What is the operating cash flow for this project? 2) Ralph and E

Future Value

(a) You've inherited $15,000,000 and have decided to use this money to open a shelter for abused women in Aurora one year from today. The annual operating costs are estimated to be $350,000 and are expected to grow at a constant rate of 2% (inflation) starting in year 2. If the interest rate is 4.5%, would you be able to fund th

FV and growth rate using TI83 Finance (TVM solver)

NOTE: if can be perforned with TI83 Finance (TVM Solver) please provide key strokes steps. 1.) You want to go to grad school 3 years from now, and you can save $5,000 per year, beginning one year from today. You plan to deposit the funds in a mutual fund which you expect to return 9% per year. Under these conditions, how muc

Maximum Payment to the Preferred Stockholders

Kuhns Corp. has 200,000 shares of preferred stock outstanding that is cumulative. The dividend is $6.50 per share and has not been paid for 3 years. If Kuhns earned $3 million this year, what could be the maximum payment to the preferred stockholders on a per share basis? a) $19.50 per share b) $15 per share c) $13 per shar

Present Value of Cash flow, Future Value of Cash flow

You are considering a project with the following cash flows: Year Cash flow 1 5600 2 9000 3 2000 5. What is the present value of these cash flows, given an 11% discount rate? $8,695.61 $8,700.89 $13,732.41 $13,812.03 $19,928.16 6. What is the future value of the fo

Multiple choice: Time value of money (TVM) for Cathy, Don Corp, Carol Thomas

Cathy sets aside $2,000 each year for 5 years. She then withdraws the funds on an equal annual basis for the next 4 years. If Cathy wishes to determine the amount of the annuity to be withdrawn each year, she should use the following two tables in this order: a. present value of an annuity of $1; future value of an annuity o

Question set: FV, PV, NPV, monthly payment, investments, interest, compounding

Finance Ch5 Q's Answer these questions using Excel functions where applicable. Show formulas and how the answer was obtained. On the first question the instructor wants us to use our present age to nearest month. I am 22 years and 2 months. 1. Assume you drink one coffee per day, 5 days a week. Assume coffee is $4.00. T

Future and Present Value of cash flows

Congratulations! You have just won the lottery! However, the lottery bureau has just informed you that you can take your winnings in one of two ways. Choice X pays $1,000,000. Choice Y pays $1,750,000 at the end of five years from now. Using a discount rate of 5 percent, based on present values, which would you choose?

Time Value of Money: FV, PV, annuity, amortize, compounding, perpetuity, payment

3- Time value of money - It is now January 1, 2006, and you will need $1,000 on January 1, 2010, in 4 years. Your bank compounds interest at an 8 percent annual rate. a. How much must you deposit today to have a balance of $1,000 on January 1, 2010? b. If you want to make 4 equal payments on each January 1 from 2007 thr

Future Values

Please help me out with the following problems 1. Time for a lump sum to double If you deposit money today in an account that pays 6.5 percent annual interest, how long will it take to double your money? 2. Time to reach a financial goal- You have $ 42,180.53 in a brokerage account, and you plan to deposit an additiona

Future value, present value and finding the required interest rate

Please help me out with the following questions. 1 -Future value - If you deposit $ 10,000 in a bank account that pays 10 percent interest annually, how much would be in your account after 5 years? 2- Present value - What is the present value of a security that will pay $ 5,000 in 20 years if securities of equal risk pa

Present value of future payments


Sociology of Work and Industry: Innovations for 'Future Success'

You work in a large public sector organization that is in a period of transition. You have been asked to join a "Future Success" change planning team. The team has agreed by consensus that you will prepare a summary of major organizational innovations that can improve productivity and the quality of working life. What innovation

Calculating present value factors for different cases

Use the basic formula for present value, along with the given opportunity cost, i, and the number of periods, n, to calculate the present value interest factor in each of the cases shown. Compare the calculated value to the table value. Case-- Opportunity Cost,i-- # of periods, n-- A--

Stock price in future

A stock that currently trades for $50 per share is expected to pay a year-end dividend of $2 per share. The dividend is expected to grow at a constant rate over time. Beta is 1.2, risk-free rate is 5%, and market risk premium is 5%. What is the stock's expected price seven years from today? (Please include formula in Excel)

GM and the future

Do you think that the the worst is over for GM? From a marketing standpoint, what does GM need to do in order to overcome their current troubles? 5 examples From an operations standpoint, what does GM need to do in order to overcome their current troubles? 5 examples Are these suggested solutions from marketing and ope


This week we learn how to calculate the time value of money and why it is an important equation. It is fairly certain that this equation will become relevant in our lives. Drawing on your personal experience and/or future expectations, come up with an example where the time value of money would be important to you. Develop the v

Time value of money problems

Time value of money exercises 1. What is the present value of the following series of cash flows discounted at 12 percent: $40,000 now; $50,000 at the end of the first year; $0 at the end of year the second year; $60,000 at the end of the third year; and $70,000 at the end of the fourth year? 2. Assume an income-producin

Calculating Present Value of TVM Lottery Winnings

You just won the TVM Lottery. You will receive $1 million today plus another 10 annual payments that increase by $400,000 per year. Thus, in one year you receive $1.4 million. In two years, you get $1.8 million, and so on. If the appropriate interest rate is 10 percent, what is the present value of your winnings?

Calculating Future Values

Compute the future value of $1,000 compounded annually for a. 10 years at 5 percent b. 10 years at 7 percent c. 20 years at 5 percent d. Why is the interest earned in part (c) not twice the amount earned in part (a)

E6-15 Investment Decision: Time Value of Money

Andrew Bogut just received a signing bonus of $1,000,000. His plan is to invest this payment in a fund that will earn 8%, compounded annually. A) If Bogut plans to establish the AB Foundation once the fund grows to $1,999,000, how many years until he can establish the foundation? B) Instead of investing the entire $1,000,

Future Values Tables

Chapter 4: Problem 4.3 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 quadruple. Case Interest Rate A 7% B 40 C 20 D

Time value of money: begin with one penny.

Suppose that you begin the month with one penny. Each day, you earn as much as the total you possessed the day before (day 1 you have $0.01, day 2 you earn $0.01 and you now possess $0.02, day 3 you earn $0.02 and now possess $0.04, etc.). How much will you possess at the end of one month?

Deterrent for future crimes?

Do you think punishment for a crime should be a deterrent for future crimes? Would a more lenient punishment for a first time offender be a sufficient deterrent?