The aim of this paper is to learn about time-value-of-money to make optimal decisions as manger must understand the relationship between a dollars present today and a dollar in the future. Time value of money Today’s financial managers often have to compare cash payments that occur on different dates. To make optimal decisions, the manager must understand the relationship between a dollar today [present value] and a dollar in the future [future value]. The time value of money is basically a measurement or perspective of an investment you might make while still considering its future decrease in value due to inflation.
The time value of money allows us to understand what that inflation or decrease may become in the future or present. Most importantly, the time value of money concept allows us to decide whether it would be beneficial placing a sum of money into investment where it collects value from interest, or whether that same amount of money would be most valuable in the present due to inflation rates. Understanding the concept of time value of money It is very important for managers to understand the concept of time value of money because it reminds them that any amount of money is worth more when it is.
The Essay on A Moment Momenta Time Future Past
A moment exists in what we call time. Time in itself, is a figment of our imagination. The only part of time that actually exists is the present moment. All other moments become memory or expectation, leaving them to be non existent. In truth, the present moment is the only part of time that can be experienced by the six senses. By nature a person, likes to believe that time is a fully existent ...
STRATEGIC CORPORATE FINANCE received sooner rather than later. Therefore, certain decisions need to be made based on the company’s needs and capabilities. Managers have to keep in mind that a particular amount of money considered today has a different buying power than that same amount of money would have in the future. The value of that money changes due to two factors: earned interest and inflation (Study finance, 2013, Par. 1).
These are both considered when organizations make decisions concerning the time value of money.
Prior to making decisions, measurements must be made including determining the future value and the present value of that same amount of money. Managers measure the future value by multiplying the principle amount by the interest rate and then adding the interest which was gained to the principle amount. This gives them the basic idea of what that same amount of money will be worth in the future. Managers can then decide whether the added interest or inflation is large enough to use the money short-term or long-term.
3) Calculate the future value of the followings: ? a. $120,537. 19 if invested for three years at a 3% interest rate? b. $337,891. 22 if invested for seven years at a 6% interest rate? c. $420,891. 12 if invested for eleven years at an 12% interest rate d. $525,520. 22 if invested for fourteen years with a 15% interest rate? Used Table 1 The following calculations were performed according to sources obtained from Jcconney (2013).
STRATEGIC CORPORATE FINANCE b. c. 4) Calculate the present value of the followings: ? a. $262,126.
17 to be received six years from now with a 4% interest rate? b. $325,003. 21 to be received eight years from now with a 7% interest rate? c. $421,567. 35 to received ten years from now with an 10% interest rate? d. $631,500. 05 to be received twelve years from now with a 13% interest rate? Used Table 1 The following calculations were performed according to sources obtained from Jcconey (2013).
a. b. c. d. STRATEGIC CORPORATE FINANCE 5) Suppose you are to receive a stream of annual payments (also called an “annuity”) of $525,891.
The Essay on Interest Groups Group Money Time
Interest Groups As Americans devote less and less time to an active participation in politics, they are increasing their participation in interest groups. As a result politicians are losing touch with the constituents that they represent. To the modern politician, the special interest and the people have become objectively indistinguishable. It is natural for people of like minds to want to form ...
12 every year for seven years starting at the end of this year. The interest rate is 15%. What is the present value of these seven payments? ?Please use Table 3 The following was calculated using resources from J Cooney (2013).
6) Suppose you are to receive a payment of $637,891. 24 at the end of each year for six years. You are depositing these payments in a bank account that pays 12% interest. Given these six payments and this interest rate, how much will be in your bank account in six years? The following was calculated using resources from Table 2 Ordinary Annuity.
Study finance (2013).
637,891. 24 x 8. 1152 = 5,176,614. 99 Learning objectives mastered This case assignment module 2 has allowed me to understand money and the value of money. Additionally, it also allowed me to understand how outside factors such as inflation can make a large difference in the financial decision process. Prior to this case, I was not familiar with the present and future value calculations. I found this module to be quite challenging and rewarding at the same time as I realized the way in which money can.
