Unit VII Paper Elizabeth Scott BBA/3301 January 13, 2013 Nchacha Etta Capital Budgeting When evaluating capital budgeting projects, the internal rate of return (IRR) and the net present value (NPV) methods are two major approaches used. IRR and NPV are the most widely used in capital budgeting. One other approach is the profitability index (PI) is essentially a variation on the NPV method. A question might be if these always give the same solutions to the problems
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monthly payment would be made using an actual interest rate of 8.95%. I think that the EAR in this case is very close to the quoted 8.6% APR. On this much money it could cause a big difference in the amount paid in the end but that is still a lower rate than the banks were offering for the $8M. This is also being paid back in a fairly quick time which lowers the interest damage taken as well. I agree with the decision to take the loan. Task 2 1. Raytheon
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Gregory Cayo Time value of money & inventing Davenport University/ Finc 510 Time Value of money plays a major role in our lives. Whether you are an investor or a worker, somehow you still have to deal with it. As an investor, when starting an investment with a present value, the future value would eventually make profit in the next year or so. In other words, compounding is the name given to a starting investment that generates interest. Additionally, many jobs have 401(k), which allow
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HANH DANG ID 1236466 ASSIGNMENT 1 CHAPTER 4 4-8 Present Value (PV) = $20,000 Time : 5 years = 60 months Interest Rate : 12% = 1% per month The monthly loan payment is FV = PV (1+I)^N = $-20000 (1+ 0.01) ^60 = $444.89 EFF% = (1+I/M)^M – 1 = (1 + 0.12/12)^12 – 1 = 1.1268 – 1 = 0.1268 The loan’s EFF % = 12.68% 4-10 a. FV = PV (1 + I)^N = $500 (1+ 0.06) ^ 10 = $895.42 b. FV = $500 (1+0.12)^10 = $1552.92 c. PV = $500 / (1+0.06)^10 = $279.20 d. PV = $500 / (1+ 0.12)^ 10 =
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beneficial to pay off the debt vs. putting money in a savings account? Explain the pros and cons of either option. A benefit of paying off the debt is that you will not have to keep paying finance charges. For example a $ 10,000 debt with a 14% interest rate will cost you $ 6,889.60 in interest over the course of a four year term. One benefit to paying these charges if you pay them on time it will help your credit score stay higher. One benefit to putting your money in a savings account is that it is
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Prof. Wajeeh Elali Ahlia University & George Washington University EMSE 6410 / Fall 2015 Case # 1 Time Value of Money(*) Assume today is November 5, 2015. Natasha Kingery is 30 years old and has a Bachelor of Science degree in computer science she is currently employed as Tier 2 field services representative for a telephony corporation located in Seattle, Washington, and earns $38,000 a year that she anticipates will grow at 3% per year. Natasha hopes to retire at age 65 and has just begun to
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justifiable price of common stock? The dividend discount model (DDM) states that the price of the stock at a given time is: Po= Div1/ (r-g) where; Po= value of the stock, Div1=Dividend distributed the following year, r= required rate of return, g=growth rate of dividends, the growth rate “g” is assumed to be constant. The value of the stock can also be found based on the following over time: Po = Div1/ (1+r) + Div2/ (1+r) 2 + Div3/ (1+r) 3 + (Divn +Pn)/ (1+r) n Therefore, Po, P1, P2 and Pn can be
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indicate whether an investment increases the firm's value 2. Ignores cash flows beyond the payback period 3. Ignores the time value of money 4. Ignores the risk of future cash flows Discounted Payback Period Advantages Disadvantages 1. No concrete decision criteria that indicate whether the investment increases the firm's 1. Considers the time value of money value 2. Considers the riskiness of the project's 2. Requires an estimate of the cost of capital in order to calculate the
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EXECUTIVE SUMMARY Background and Key Issues: In 2006, the project “long-term acute care” (LTAC) was prepared to propose to University of Virginia Health System. The central issues include whether the LTAC facility will be profitable for U. Va. Health System, whether the projected profit margin is above the minimum 5%bottom line with an adequate coverage of interest expense from $15 million debt-financed. Analysis: The NPV generated from launching LTAC facility is forecasted as $24.7 million by
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MBA Master of Business Administration International Finance & Financial Management ASSIGNMENT 2015– 2016 The questions in this assignment require some quantitative work and some interpretation. When answering the discussion questions you should try to make full use of the relevant theoretical propositions and concepts. The assignment should be undertaken in groups of four or five. All members of the group should participate in the development of the answers to all the questions. If individuals
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