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The Time Value of Money

Develop a Retirement & Capital Needs Analysis

Larry is 40 year old and has never married. He wants to retire at age 62 with an 80% wage replacement ratio. Larry currently earns $100,000 as an employee and has managed to save $100,000 towards his retirement goal (including investment assets and cash equivalents). He is currently saving $5,000 per year in his 401(k) plan.

Investments, Loans, Insursance Terms & Calculations

1. Why is it necessary to know about time value of money concepts? Why can't you just make judgments about future cash flows based purely on the size of the cash flows? 2. Define Future Value. 3. Define Present Value. 4. What are annuities? 5. (calculating future value) You buy an 8 year, 7% CD for $1,000. In

Future Value of Uneven Cash Flows

One year ago, the Beauty Skins Bhd deposited $3,600 in an investment account for the purpose of buying new equipment four years from today. Today, it is adding another $5,000 to this account. It plans to make a final deposit of $7,500 to the account next year. How much will be available when it is ready to buy the equipment, ass

Portfolio Security & Bond Maturation

Part 1: (a) The LUFTUS corp offers a 6% bond with a current market price of $875.05 . The yield to maturity is 7.34% . The face value is $1,000. Interest is paid semiannually. How many years is it until this bond matures? (b) A corporate bond with a face value of $1,000 matures

The Basics of Financial Management

Q7. The zero coupon bonds of Markus Inc. have a market price of RM394.47, a face value of RM1,000, and a yield to maturity of 6.87%. When will this bond mature? (Answer in number of years.) Q8. Windmill Corp has a 15-year bond issue outstanding that pays a 9% coupon. The bond is currently priced at RM894.60 and has a par value

Basics of Financial Management

Q1 Camel Industries is expected to pay an annual dividend of RM1.30 a share next month. The market price of the stock is RM24.80 and the growth rate is 3 percent. What is the firm's cost of equity? Q2 An investment promises the following cash flow stream: RM1,000 at Time 0; RM2,000 at the end of Year 1 (or at T=1); RM3,000

Net Present Value, Payback, Profitability Index, and IRR: 3.8% discount rate

Using a 3.8% discount rate, calculate the Net Present Value, Payback, Profitability Index, and IRR for each of the investment projects below (note, the inflows are for each year). Based on your calculations rank the projects and support you answer. Project 1 Initial Invest= $520,000, Cash inflows of $100,000 for years 1-5 a

Corporate Governance, Corporate Social Responsibility and Business Globalization

1- Give ONE (1) example to describe how corporate social responsibility can be consistent with effort of the management to maximize the firm's value. 2- Doing business in the era of globalization exposes a company to more challenges. Provide ONE (1) example of these challenges and explain the action that a financial manage

The Time Value of Money, Annual Payments and Interest Rates

1. How much will my annual payments be on a $15,000 loan at 12% interest, to be paid off in 4 years? 2. How much will my monthly payments be on a $15,000 loan at 12% interest, to be paid off in 4 years? 3. How long will it take me to save $13,816.45 if I make annual payments of $1,000 at 7%? 4. Which of the following

Time Value of Money and Rate of Interest

1. How much would you accept in lump sum today, in place of a lottery payment of $50,000 at the end of each of 20 years. ($1.000,000 in total), assuming you could invest it at an 8% rate? 2. What will be the value in 20 years of $5,000 contributed at the end of each year into an IRA (individual retirement account) which pay

Time Value of Money Definition and Several Calculations

I am having problems understanding the concepts and mathematical formulas of time value of money especially future value, present value and etc... 1. Provide a definition of time value of money. 2. To what extent is it important for financial managers to understand the concept of time value of money? Why? Please explain your

Advance Auto Parts, Inc. Profile and Vital Financial Information

Advance Auto Parts AAP Search Advance Auto Parts website and find the section called "Investor Relations" to obtain the financial information of the company over the past several years. Answer the following questions: 1. Provide a brief description of the Advance Auto Parts Inc, its main business and operational activitie

Shareholder's Wealth and Corporate Governance

a. If the goal of a firm is to maximize the shareholders' wealth, does it mean profit is not important at all? Explain your answer. b. What are the advantages and disadvantages of the three principal forms of business organization? c. Briefly explain the term "agency costs" as related to a corporation. How can agency problem

Components in Calculating the Time Value of Money

All answers should be in a single Excel file. Show the step by step calculations how it was done and explained thoroughly by using excel: 1 If you deposit $15,000 today and earn 8% annual interest, how much will you have in 9 years? Answer: $29,985.07 2 Tiffany will receive a graduation gift of $10,000 from her pare

Basic Concepts of Financial Computations

I have two attachments I need help with. They are various financial computations. In addition to solving the problems, I need to show the formula used to get the correct answer.

AutoEdge Expansion and Net Present Value Analysis

Over lunch, you and Lester meet to discuss your next assignment. "The board of directors has been working on the cost and benefits of various expansion options," he says. "We have developed the numbers for one scenario in this spreadsheet, and we want you to review it," he says handing it to you. "So you're looking for me

sales revenue

After receiving the quarterly reports from all the departments within the hotel you are managing, you notice that the hotel's bar operation has had declining cash sales revenue steadily throughout the quarter. You begin to suspect that some of the employees in the bar may not have been reporting these sales and keeping the cash

Straight Line Deprecation and Double Declining Depreciation

Hello I am having issues with the below problems, if you can kindly help and advise your approach to figuring out the solutions. Thank you, QUESTION ONE - On January 1, 2008, Nobel Corporation acquired machinery at a cost of $600,000. Nobel adopted the straight-line method of depreciation for this machine and had be

Time Value of Money Utilizing the Present Worth Calculation

The city bridge inspection team had noted 4 bridges that need replacement. Resources are available to do one of these. Proposals to repair them have been received as follows. Also shown are the number of vehicles per year that use each bridge that is an indicator of the size of the problem if the bridge would fail. Using a

Performing a Financial Analysis - Calculating the NPV

Please see the attached file for the full problem instructions. All formulas used need to be in excel so that when the cell is highlighted, the formula used can be seen. The nonprofit Center for Original Oxygen (CO2) has decided to concentrate its efforts to a particular means of reducing carbon dioxide thereby enabling

Present Value of Growing Annuity vs Ordinary Annuity

The city of Cincinnati gave up the right to collect parking fees over a 30-year period in exchange for a lump sum of $92 million plus a 30-year annuity of $3 million. Suppose that if the city had not entered into that arrangement, it would have collected parking fees the following year of $6 million (net of operating costs), and

How transfer pricing impacts performance measures

Please comment on transfer pricing issues and measures for performance evaluations and the importance of these issues, how they are related and why they are very important in the business environment.

Financial Concepts-Portfolio Theory, CAPM Homework

Financial Concepts Portfolio Theory, CAPM Homework Homework Exercise 8 Rate of Return Year Asset A Asset B Market 1 20.0% 19.0% 9.0% 2 -11.0% 22.0% 12.0% 3 10.0% -6.0% 6.0% 4 -9.0% -14.0% -4.0% 5 21.0% 28.0% 17.0% For this exercise, you might want to copy and paste the table above into Excel and then do all your

Time Value of Money

Note: Unless otherwise stated, assume that interest is calculated on an annual basis 1) Ian invests $1000 today in a 3 year CD paying 3.75% annually. He receives the full amount of principal and accrued interest in 3 years. How much will he receive in 2 years? N i PV PMT FV 2) How much would Sylvia have to

Value of Financial Instrument

Assume the following data: Current assets = 500; Current liabilities = 250; Inventory = 200; Account receivables = 200. Calculate the current ratio. a) 2.0 b) 1.5 c) 1.0 d) 2.5 Assets are listed on the balance sheet in order of: I) decreasing liquidity; II) decreasing size; III) increasing size; IV) r

Calculating the NPV for a new machine

A company is looking to add a new machine at a cost of $4,133,250. The company expects this equipment will lead to cash flows of $817,322, $863,275, $937,250, $1,018,610, $1,212,960, and $1,225,000 over the next six years. If the appropriate discount rate is 15 percent, what is the NPV of this investment?

Future Value Calculation and Annuities

Your parents are planning to retire in 18 years. They currently have $250,000. They supplement those dollars with an annual payment into a retirement account of $20,000. What will be the value of all dollars if the funds can earn an interest rate of 5%? What will be the value of all dollars if the funds can earn an interest

Calculating NPV and IRR for Investments

An investment requires an outflow of $300,000 at time zero and another outflow of $60,000 at the end of the first year. Net after-tax inflows for years 2, 3 and 4 are zero. After tax inflows in years 5, 6 and 7 are $60,000, $400,000 and $400,000, respectively. The required rate of return is 17%. What is the Net Present Value of

Cost of equity of Nike, Sony Corporation, and McDonald's Corporation

The cost of equity (discount rate) can also be determined by using the Capital Asset Pricing Model (CAPM). Calculating the cost of equity using the CAPM model is often more difficult than using the dividend discount model. The companies' financial statements do not show the cost of equity. The following table shows necessary