Future Value of Money Calculations
What is the future value of an initial $100 after 3 years if it is invested in an account paying 10 percent annual interest?
What is the future value of an initial $100 after 3 years if it is invested in an account paying 10 percent annual interest?
Little Giant is building a manufacturing plant that will require a cash outlay of $300,000 for the initial purchase of a building, $450,000 for remodeling the first year, and $710,00 for new equipment in the second year. If the firm's cost of capital is 12 percent, what is the present value of the net investment at time 0? a. $
A) Joe won a lottery jackpot that will pay him $12,000 each year for the next ten years. If the market interest rates are currently 12%, how much does the lottery have to invest today to pay out this prize to Joe over the next ten years? b) Mary just deposited $33,000 in an account paying 10% interest. She plans to leave the
Future value for various compounding periods. Find the amount to which $500 will grow under each of these conditions: a.12% compounded annually for 5 years b.12% compounded semiannually for 5 yrs c:12 % compounded quarterly for 5 years d: 12 %compounded monthly for 5 yrs e. 12% compounded daily for 5 yrs f. Why does the ob
3. Kay Mart owns an annuity that will begin making semiannual payments of $7500 in perpetuity to her or her heirs. The first payment will take place 3 years and 6 months from today. She is considering selling the annuity to an investor whose required rate of return is 11% EAR. How much will she get for her annuity if she d
1. An investor is considering a business opportunity with the following predicted cash flows. Time 0 1 2 3 4 Predicted Cash Flow 2200 6500 8500 X 6400 The investor could earn 10% compounded quarterly on an investment of similar risk. If the investor is willing to pay $26,000 for this business opportunity, what is
Show the formula used in the following questions in detail 1) a. What is the future value of $4,000 invested at 6% for 22 years with annual compounding? b. What is the future value of $4,000 invested at 6% for 22 years with monthly compounding? c. What is the future value of $4,000 invested at 6% for 22 years with cont
The Acme Company must solve a series of five problems that require you to apply the concept of "time value of money," or TVM. The five problems are listed below. Solving them will require the use of Microsoft Excel. Before you begin your work, each student is to select a unique nine-digit random number that contains no zeros, no
Identify and describe at least one financial application of Time Value of Money employed by each of the following businesses: Commercial banks Credit card financial service companies Insurance companies State governments - lotteries Retirement plan financial service providers
What is the current value of a share of a common stock to an investor who requires a 12% annual rate of return, if next year's dividend, D1, is expected to be $3 per share and dividends are expected to grow at an annual rate of 4% for the foreseeable future?
What impact do interest rates have on the calculation of future and present value? How does the length of time affect future and present value?
When would we use present value calculations? When would we use future value calculations? Which is more likely to be used in accounting and why?
Why is the time value of money concept important in accounting? Under what circumstances would we use the time value of money calculations?
Kim has arranged a meeting with you and the head of manufacturing because she thinks you need to explain to him the time value of money. Kim is concerned that many of the manufacturing projects that have been pursued are based on the payback period and do not recognize that a dollar received 3 years from now is not the same as a
1. Over the past several years, Helen Chang has been able to save regularly. As a result, today she has $14,188 in savings and investments. She wants to establish her own business in 5 years and fells she will need $50,000 to do so. a. If Helen can earn 12% on her money, how much will her $14,188 be worth in about 5 years
What do you see for the future of XML? Obviously, one of the largest problems will be deciding on schemas. How do you think this should be done? Propose a way to manage schemas in different companies, industries, and business in general. What pitfalls can you work around?
The Acme Company must solve a series of five problems that require you to apply the concept of "time value of money," or TVM. The five problems are listed below solving them will require the use of Microsoft Excel. Before you begin you work, each student is to select a unique nine-digit random number that contains no zeros, no "
If an investor would like to have $9922 in two years, what is the present value that must be invested now to reach that amount if the investor is given a 10% interest rate that compounds annually?
1. Can you explain the difference between "simple" and "compound" interest? Please provide some of the uses of compound interest in business. I also need to know the effects of using compound interest when evaluating future value transactions and calculations. 2. What is "present value"? What is an example of the "present
1. Explain what is the difference between "simple" and "compound" interest? Provide some of the uses of compound interest in business. What are the effects of using compound interest when evaluating future value transactions and calculations. 2. What is "present value"? What is an example of the "present value" concept? How d
David and Eliza are married and under 65 years of age. During 2004, they furnish more than half of the support of their 18-year old son, Timothy. Timothy earns $4,000 from a part-time job, most of which he sets aside for future college expenses. During 2004, they also furnish more than half of the support of their 25-year old
Part (a) Compute the amount that a $30,000 investment today would accumulate at 10% (compound interest) by the end of 6 years. Part (b) Tom wants to retire at the end of this year (2004). His life expectancy is 20 years from his retirement. Tom has come to you, his CPA, to learn how much he should deposit on December 31,
You feel that as NL&C grows, the employee base will grow increasingly diverse. With the mindset of doing things right the first time, you plan to present a diversity strategy which emulates the best practices of other companies. You've hear that Nestle is a standard-setter. A friend of yours in HR sends you to the Diversity
WHAT IS THE VALUE AT THE END OF YEAR 3 OF THE FOLLOWING CASH FLOW STREAM IF THE QUOTED INTEREST RATE IS 10 PERCENT, COMPOUNDED SEMIANNUALLY? 0 2 4 6 PERIODS | | | | 100 100 100
Someone spends $60/acre to plant trees on marginal land. The expected rate of return is 4% and inflation is expected to be 6%. What is the expected value of the timber after 20 years. How would you calculate this using a financial calculator?
If an organization has an obligation to pay $5,000 to a supplier two years from now, the present value of the obligation: is less than $5,000. is $5,000. is more than $5,000. could be calculated using an annuity factor from the present value tables.
Imagine you are a business executive in the year 2015. How is the business world different than it was when you were a master's degree student in 2006.
Ted Gardiner has just turned 30 years old. He has currently accumulated $35,000 toward his planned retirement at age 60. He wants to accumulate enough money over the next 30 years to provide for a 20-year retirement annuity of $100,000 at the beginning of each year, starting with his 60th birthday. He plans to save $5,000 at t
You are currently 30 years of age. You intend to retire at age 60 and you want to be able to receive a 20-year, $100,000 beginning-of-year annuity with the first payment to be received on your 60th birthday. You would like to save enough money over the next 15 years to achieve your objective; that is, you want to accumulate th
Present and future values for different periods. Find the following values, using the equations and then a financial calculator compounding/discounting occurs annually. a. An initial $500 compounded for 1 year at 6%. b. An initial $500 compounded for 2 years at 6%. c. The present value of $500 due in 1 year at a discount r