of a larger company or he may choose to improve his production with the use of technological advances. Through technology, such as the use of computerized cutting instruments that will improve the accuracy of the cuts and allows for less production time it would allow the Guillermo Furniture Company to increase profit and a low cost per piece. Another alternative is to form a partnership with a competitor not yet
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Chapter 2 Time Value of Money MINI CASE Assume that you are nearing graduation and that you have applied for a job with a local bank. As part of the bank's evaluation process, you have been asked to take an examination which covers several financial analysis techniques. The first section of the test addresses discounted cash flow analysis. See how you would do by answering the following questions. a. Draw time lines for (a) a $100 lump sum cash flow at the end of year 2, (b) an ordinary
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MT 217: Finance - Introduction Prof: Beverley Belgrove Unit 2: The Value of Money Name: Khazma Alsayed Date: 29-10-2012 SOLVING FOR r Suppose you can buy a security at a price of $78.35 that will pay you $100 after fi ve years. What annual rate of return will you earn if you purchase the security? Here you know PV, FV, and n, but you do not know r, the interest rate that you will earn on your investment. Using your financial calculator, enter the known values into the appropriate locations—that
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KEATMX01_p001-008.qxd 11/2/12 2:22 PM Page 1 Calculations for Time Value of Money TVM In this appendix, a brief explanation of the computation of the time value of money is given for readers not familiar with this subject. Modern technology has made these calculations very easy. Many computer programs have built-in time-value functions, and a large assortment of handheld calculators will solve these problems using special keys. However, some people who use these methods do not
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opportunity that requires a $1000 investment today and will have a $2000 payoff in six years. This would appear on a time- line as: 0126 ... Given: Solve for: N I/Y PV 10 7 0 60,000 PMT 4343 FV $1000 $2000 One way to analyze this investment is to ask the question: What interest rate, r, would you need so that the present value of what you get is exactly equal to the present value of what you give up? 2000 1000 = 11 + r26 Rearranging this calculation gives the following:
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raise money to fund sustainable education projects in Latin America Email me at mcdo8210@mylaurier.ca for info on how to get involved! Visit lauriersos.com for info on more sessions. (EC120, MA129, PS101, AS101, and more!) Thank you for supporting! 3 Agenda •Social Factors • • • • Ethics CSR Managing Stakeholders Demographics •Political Factors • Going Long (Buy-Sell Transactions) • Margin Buying • Short Selling • Approx. Yield of Bonds •Time Value of Money •
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personal balance sheet Generate a personal income and expense statement. Develop a good record-keeping system and use ratios to evaluate personal financial statements. • Construct a cash budget and use it to monitor and control spending. • Apply time vale of money concepts to put a monetary value on financial goals. • • • • © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Mapping Out Your Financial
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process, state the inflows and outflows in each future time period and discuss whether the amount or the timing (or both) is fixed or uncertain. Describe in the form of a cashflow model the operation of a zero coupon bond, a fixed interest security, an index-linked security, cash on deposit, an equity, an “interest only” loan, a repayment loan, and an annuity certain. 2. (ii) Describe how to take into account the time value of money using the concepts of compound interest and discounting
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Time Value of Money 1. The present value of money, also referred to as discounted value, is the current worth of a future sum of money or stream of cash flows given a specified rate of return. Future cash flows are discounted at the discounted rate, and the higher the discounted rate, the lower the present value of the future cash flows. Determining the appropriate discount rate is the key to properly valuing future cash flows, whether they be earnings or obligations. (Chapter 9 Page 257
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Chapter 2: Time Value of Money Practice Problems FV of a lump sum i. A company’s 2005 sales were $100 million. If sales grow at 8% per year, how large will they be 10 years later, in 2015, in millions? PV of a lump sum ii. Suppose a U.S. government bond will pay $1,000 three years from now. If the going interest rate on 3‐year government bonds is 4%, how much is the bond worth today? Interest rate on a simple lump sum investment iii. The U.S. Treasury offers to sell you a bond for $613
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