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The Time Value of Money

Time Value of Money Explanation

Time Value of Money Scenario 1 The Children's Hospital of Philadelphia (C.H.o.P) is considering adding a da Vinci robot to their Operating Room suites. The purpose of the acquisition is to facilitate more urologic cases hence deriving more income. Since most urological cases are done on an outpatient basis this initiative

Time Value of Money and Internal Rate of Return

Q1) Jill and Jack are making arrangement for their wedding in April 2012. The Romantic Garden Reception Centre says that they can pay $5000 on 1Apr 2010, $5000 on 1 April 20111 and $10000 on 1April 2012. For the Bridal Bliss Wedding Centre the payments are $2000 on 1 April 2010, $5000 on 1 October 2010, $6000 on 1 April 2011 and

Present value calculations

Using a present value table, your calculator, or a copmuter program present value function, answer the following questions: A. What is the present value of nine annual cash payments of $8,000, to be paid at the end of each year using an interest rate of 6%? B. What is the present value of $30,000 to be paid at the end of

Important information about Time Value of Money Questions

Determine the amount that must be deposited now at compound interest to provide the desired sum for each of the following: 1. Amount to be invested for 10 years at 6% per annum, compounded semiannually, to equal $17,000. 2. Amount to be invested for 2 1/2 years at 8% per annum, compounded quarterly, to equal $5,000. 3. A

Time Value of Money Problems

1) At the end of 2005, Uma Corporation was considering undertaking a major long-term project in an effort to remain competitive in its industry. The production and sales departments determined the potential annual cash flow savings that could accrue to he firm if it acts soon. Specifically, they estimate that a mixed stream o

Present & Future Values, Annuity Payments, Growing Perpetuitya

5.1 Future value: Chuck Tomkovick is planning to invest $25,000 today in a mutual fund that will provide a return of 8 percent each year. What will be the value of the investment in 10 years? 5.30 Patrick Seeley has $2,400 that he is looking to invest. His brother approached him with an investment

Calculate Amount to Save for Retirement in Several Scenarios

Assumptions: 1. Your required rate of return until retirement is 8% 2. Your retirement payout will be a fixed payment, and will be adjusted for a much more conservative return of 5%. This will be your return on the payout until you die. Process: Using the time value of money, you will need to calculate how much you

Calculations

1. Simple Interest versus Compound Interest - First City Bank pays 8 percent simple interest on its savings account balances, whereas Second City Bank pays 8 percent interest compounded annually. If you made $5,000 deposit in each bank, how much more money would you earn from your Second City Bank account at the end of 10 years

Explain how to complete 5 problems using TVM functions

After graduation, you plan to work for Mega Corporation for 10 years and then start your own business. You expect to save $5,000 a year for the first 5 years and $10,000 annually for the following 5 years, with the first deposit being made a year from today. In addition, your grandfather just gave you a $10,000 graduation gift

Retirement planning problems for Pat and Chris. Use time value of money concepts

The following retirement problem is often used to illustrate important aspects of savings and compound interest - see what you can learn by working the problem. Pat and Chris are both recent MBA graduates and are each 25 years old. They both plan on retiring when they are 65 years old. Pat has decided to put $5,000 into an

Finance

1. Calculate the future value of $2000 in a) 5 years at an interest rate of 5% per year. b) 10 years at an interest rate of 5% per year. c) 5 years at an interest rate of 10% per year. d) Why is the amount of interest earned in pat (a) less than half the amount of interest earned in part (b)? 2. You are thinking of r

Interest rates and Time Value problem

1) Calculate the future value of $2000 in a) 5 years at interest rate of 5% per year b) 10 years at an interest rate of 5% per year c) 5 years at an interest rate of 10% per year d) why is the amount of interest earned in part (a) less than half the amount of interest earned in (b) 2) You are thinking of retiring. Your

Finance: Loan for engagement ring, sabbatical policy. Time value of money (TVM)

Problem 1 chapter 4 You have just taken out a five-year loan from a bank to buy an engagement ring. The ring costs $5000.You plan to put down $1000 and borrow $4000. You will need to make annual payments of $1000 at the end of each year. Show the timeline of the loan from your prospective. How much would the timeline differ if

Real Estate Finance Problems

Need help with the following problems. I would like see how to solve each problem with a formula and what inputs you would use when using a financial calculator. 1. Your parents are giving you $500 a month for five years while you attend college to earn both a bachelor's and a master's degree. At a 7 percent discount rate, w

Time Value of Money: Ordinary Annuity and Annuity Due

There are 3 parts to this; part of this has been completed 1. Present value calculation 2. Future value of annuity: ordinary annuity and annuity due 3. Loan interest deductions 1. Present value calculation: A PVIF  1  (1  0.02)4  ?? B PVIF  1  (1  0.10)2 

Financial Management - Sample quiz questions

Can you help? I'm stuck on a few True/False questions... Chapter 1 1. A financial analyst is responsible for maintaining and controlling the firm's daily cash balances. Frequently manages the firm's short-term investments and coordinates short-term borrowing and banking relationships. 2. Finance is concerned

Time Value of Money Additional Down Payment

Please see the attached file. 1. I am getting ready to buy a new car. I plan on spending $35,000 for the car and I believe my current car has a $17,000 trade-in value and I make no additional downpayment. I keep my vehicles 5 years but would like a three-year loan. What will my monthly car payment be at the end of each

15 BUS MATH Questions: Time Value of Money concepts

1. The terms of a loan indicate how often interest is compounded. () True False 2. To compound daily means to compound 360 times a year. () True False 3. The number of compounding periods for $6,600.00 at 12% compounded quarterly for 15 years is 30 periods. () True Fals

Evaluating Phone Plans Using the Time Value of Money

A recent article at MSN was "Droid Versus Pre Versus iPhone: A Cost of Ownership Reality Check: Which of these three hot handsets will cost you the most over two years?" By Ian Paul, PC World. (It can be found at the following although it is not needed for this question as the data is listed below.) http://tech.msn.com/pr

Cash flow; TVM, PV of Hartson liability, FV of Kim's annuities

Jamison Inc. shows the following information on its 2009 income statement: sales= $196,000, costs=$104,000, other expenses= $6,800, depreciation expense = $9,100, interest expense = $14,800, taxes= $21,455, dividends = $10,400. In addition, you are told that the firm issued $5,700 in new equity during 2009 and redeemed $7,300 i

Time money

1.Find the compound amount if $6,400 is invested for 2 years at 12% compounded monthly. What difference would compounding daily make in this example? 2.Deposits of $1,000, $1,100 and $680 were made into a savings account, the first two years ago, the second 18 months ago, the third 6 months ago. How much is in the account no

Analyzing the Time Value of Money

Sally and Ed have approached you with their financial problems, described below. Situation #1 Sally and Ed have $10,000 cash to invest with a bank offering a 4% interest rate. They are not sure whether to invest the cash with the interest compounded quarterly, semi-annually, or annually. Calculate the balance at the end o

Do you think that TVM is like driving a car?

Your answer "I think that driving a car and the time value of money are a good analogy. First, the longer you drive your car, the more gasoline you use. Hence, at the end of the journey, that is when you reach your destination, the value of the gasoline in the automobile is much less than when you started the journey. Second, th

Time Value of Money

1.16 At an interest rate of 8% per year, $10,000 today is equivalent to how much (a) 1 year from now and (b) 1 year ago? 1.20 Certain certificates of deposits accumulate interest at 10% per year simple interest. if a company invests $240,000 now in these certificates for the purchase of a new machine 3 years from now, how