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The Time Value of Money

Present value calculation problem

You charged $2400 on your credit card for holiday gifts. Your credit card company charges you 8% annual interest, compounded monthly. If you make the minimum payments of $75 per month, how long will it take (to the nearest month) to pay off your balance? Answer 80 months 48 months 24 months 36 months

Time value of money exercises using Excel: PV, FV, annuity, stream of cash flows

4-1 If you deposit $10,000 in a bank that pays 10% interest annually, how much will be in your account after 5 years. 4-2 What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually? 4-3 Your parents will retire in 18 years. They currently have $250,000 and they t

Present Value of Bank Account & of Gold Mine Stream of Payments

Calculate present value. A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%? B. Suppose you have two bank accounts,

You're trying to save to buy a new $170,000 Ferrari. If you believe that your mutual fund will achieve a 12% per year rate of return, and you want to buy the car for your birthday in 9 years...

1. You are scheduled to receive $20,000 in two years. When you receive it, you will invest it for six more years at 8.4% per year. How much will you have in eight years? (Question #19 from page 143 of your text) 2. You expect to receive $10,000 in two years. You plan on investing it at 11% until you have $75,000. How long w

Simple and Compound Interest

1) We put $500 into a bank account that has a stated interest rate of 6.2%. Our account pays simple interest and we will not deposit or withdraw any money; how much money would our group have in our bank account after five years? 655, 620, 625, 630 or 635? 2) If our bank account earn as compound interest how much would we

Prepare a Balance Sheet, Income Statement, Cash Flows, TVM

See attached file for proper format. Consider the following financial data for a company (all figures in thousands of dollars except stock price and # of shares): Balance Sheet Data 12/31/2010 12/31/2009 Cash & Equivalents 500 100 Accounts Receivable 220 200 Inventories 1,000

Finance: Ratios, inventory turnover, cash on hand, TVM, zero-balance accounts

QPAC Computer has net working capital of $1,000; current liabilities of $8,000; and inventory of $1,500. a. What is the current ratio? b. What is the quick ratio? Alberto Corporation has ending inventory of $750,000, and cost of goods sold for the year just ended was $2,950,000. a. What is the inventory turnover?

If a firm's required return were 0 percent, would the time value of money matter? As these returns rise above 0 percent, what impact would the increasing returns have on future value? Present value? I wonder if this is even possible. It seems like nearly everything goes up in value over time. Is anyone able to give an example of something that would meet this description? A service oriented company maybe?

If a firm's required return were 0 percent, would the time value of money matter? As these returns rise above 0 percent, what impact would the increasing returns have on future value? Present value? I wonder if this is even possible. It seems like nearly everything goes up in value over time. Is anyone able to give an ex

Discussing Future Training and Development Problems

Consider what future skills may be needed in your organization. I do not have an organization/job to discuss of my own, so my instructor suggested I get an opinion from someone who could help me with this. Listed below are some of the future skills we are to pick from if they pertain to the organization. 1. Delivering a

A company invests considerable time and money to develop sophisticated cost functions that rate high on all evaluative criteria. In the course of using the cost functions, a manager notes that in several instances the actual costs were different from the predicted costs, resulting in lower profits during one quarter of the year. The question of the value of the cost function is asked. Give some suggestions on how to answer the manager.

A company invests considerable time and money to develop sophisticated cost functions that rate high on all evaluative criteria. In the course of using the cost functions, a manager notes that in several instances the actual costs were different from the predicted costs, resulting in lower profits during one quarter of the year.

Finance

You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year. Under these conditions, how much would you have just after you make the 5th deposit, 5 years from now? a. $18,369 b. $19,287 c.

Calculating Appropriate Interest Rate

Bill plans to retire in 25 years. He currently has saved up $200,000, and he believes he will need $1,000,000 at retirement. What annual interest rate must Bill earn to reach his goal, assuming he does not save any additional funds between now and retirement?

Time value of money concepts

Why is a dollar today worth more than a dollar tomorrow? What is an annuity and give some examples. What is the effect of compounding more frequently that once per year? What is the definition of effective annual rate? Comment on the Focus on Practice Question in the chapter titles: New Century Brings Trouble for Subprime

Solve for the annual compound interest.

On Tims's twenty-sixth birthday, he deposited $7,500 in a retirement account. Each year thereafter, he deposited $1,000 more than the previous year. Determine how much was in the account immediately after his thirty-fifth birthday if the account earned annual compound interest of 5 percent?

Calculate present value of $300 at beginning of year for 5 years

What is the present value of $300 received at the beginning of each year for 5 years? Assume that the first payment is not received until the beginning of the third year (thus the last payment is received at the beginning of the 7th year). Assume the discount rate is 10% p.a. Draw timeline(s) to demonstrate your calculations.

Present Value of Money.

Joe planned to put his son, John, to a prestigious university called Brain Trust University (BTU) 10 years from now. Currently, total estimated cost (tuition, room and board, books, and other expenses) is about $60,000 per year. This cost is expected to increase at the average rate of 8% per year for the foreseeable future. It i

Normal Time, Standard Time for a Task; Incentive Plan

2. A time study was made of an existing job to develop new time standards. A worker was observed for 45 minutes. During that period, 30 units were produced. The analyst rated the worker as performing at a 90 percent performance rate. Allowances in the firm for rest and personal time are 12 percent. a. What is

Petsmart's Ranking and Market Share in the Industry

What is Petsmart's ranking and market share in the industry? What companies are its main competitors? Where does it rank in its industry and sector? Describe its performance trend over time relative to the Standard and Poor's 500 and its closest competitor. The use of a pie chart to depict market share would be beneficial.

Share Repurchase Mechanisms

What are the different mechanisms available to a firm to use to repurchase shares? Please describe each mechanism.

full time employment implications

At one time the phrase full-time meant that workers received whatever benefits the employing company had to offer. Part-time employees were generally excluded from benefits. Since many companies are scaling back on benefits to full-time employees, the line between part-and full-time is certainly beginning to blur. Since many

Calculating Amount that You Will Need to Deposit

At the end of the last week in January 2011 you opened a holiday savings account with your bank and made your first deposit into it to save for your overseas holiday that you will be take from the first week of October to the end of the last week of December 2011. You have budgeted that you will need to be able to withdraw $2,00

taxesLeasing, 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. a. Explain why a financial lease represents a secured loan in which the lender's entire debt service stream is taxable as ordinary income to the lessor/lender. b. In view of this tax cost, what tax condition must hold in order for a financial lease trans- action to generate positive net-present-value tax benefits for both the lessor and lessee? c. Suppose the lease payments in Table 21-2 must be made in advance, not arrears. (Assume that the timing of the lease payment tax deductions/obligations changes accordingly but the timing of the depreciation tax deductions does not change). Show that the net advantage to leasing for NACCO must decrease as a result. Explain why this reduction occurs. d. Show that if NACCO is nontaxable, the net advantage to leasing is negative and greater in absolute value than the net advantage of the lease to the lessor. e. Either find a lease rate that will give the financial lease a positive net advantage for both lessor and lessee, or show that no such lease rate exists. f. Explain what your answer to part e implies about the tax costs and tax benefits of the financial lease when lease payments are made in advance.

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. a. Explain why a financial lease represents a secured loan in which the lender's entire debt service stream

The Grow Corporation Cash Budget and TVM problems

The Grow Corporation's projected sales for the first eight months of 2011 are as follows: January $ 90,000 February 120,000 March 135,000 April 240,000 May $360,000 June 300,000 July 280,000 August 150,000 Of Grow's sales, 10 percent is for cash, another 60 percent is collected in the month following sale, and 30 p