Cite any sources you use. |Define the time value of money. |The value of money in a given amount of interest earned or inflation accrued over an amount of time. | |Provide a real-world example for the time |A 10% interest rate for an investment of $3‚000. In a year the interest would be $300 | |value of money. |
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can put present cash to earn returns. iii) Uncertainties – one may not be certain of future amount of cash receipts and would rather receive cash now than in future. Time Value of Money Computations i/ Compound or Future value of A Simple Amount This is the future value of a given amount that is allowed to grow at a constant interest rate for a given period of time. Sn = P (1+r)n where: Sn = Future value P = present value or principal r = interest rate n = number of years or time
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Demonstrate how risk and uncertainty affects investment returns. INDICATIVE CONTENT Introduction Firm’s goals and objectives. Time value of money. Valuation of Securities Shares and bonds. Cost of Capital Definition and component of cost of capital. Introduction to weighted average cost of capital. AF3313 (2).doc 1 (Updated in Jan 08) Capital Investment Techniques Payback. Accounting rate of returns. Internal rate of returns. Net present value. Comparisons of
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survey predictions can be made the future. These predictions will allow the company to create strategies on how to bring the company forward in the future. Net Sales Net sales show the amount of sales generated by company after the deductions of returns‚ allowances are damaged or missing goods and any discounts allowed. (Investopedia) Year | 2005 | 2006 | 2007 | 2008 | 2009 | Net Sales ($ Millions) | 10‚117‚000 | 10‚907‚000 | 11‚776‚000 | 12‚822‚000 | 12‚575‚000 | (Kellogg’s‚ 2010) Kellogg
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Q. 1 Jim makes a deposit of $12‚000 in a bank account. The deposit is to earn interest annually at the rate of 9 percent for seven years. How much will Jim have on deposit at the end of seven years? Q. 2 Find the present value of $10‚000 to be received at the end of 10 periods at 8% per period. Q.3 What is the value of the following set of cash flows today? The interest rate is 8% for all cash flows. Year Amount 1 Rs. 3000 2 Rs.5000 3
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Systematic risk is primarily based on the risks that are associated with actual or real events that may affect the market. This includes interest rates‚ inflation‚ wars and all that can affect the market and cannot be avoided through diversification. Systematic risk can be associated with riskier securities if and when compared to bonds. This rate of return is mainly unpredictable but can be profitable. My reasoning for allocating the funds amongst the three asset categories involve the rule of thumb
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The interest rate is at 7% per year. 2. For some interest rate i and some number of interest period n‚ the uniform series capital recovery factor is 0.0854 and the sinking fund factor is 0.0404. Compute the interest rate i. 3. A riverfront walkway was constructed for $1‚000‚000. The annual maintenance cost is $12‚000 per year. It is also estimated that a repair cost of $100‚000 will be needed at the time the walkway reaches its half useful life. Using an annual interest rate of 4% and a useful
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immediate payment of $1‚200‚000. Consider how interest rates impact the choice that should be made. A. The equation to calculate the discounted present value of 20 annual payments is: Present value = $100‚000/(1 + i) + $100‚000/(1 + i)2 + $100‚000/(1 + i)3 + … + $100‚000/(1 + i) If the interest rate is 3 percent‚ the present value is $1‚487‚747.49. This means that in this scenario‚ it is optimal to take the yearly installments. If the interest rate is 6 percent‚ the present value is $1‚146‚992.12. This
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The increasing complexity of today’s business environment makes it virtually impossible for most firms to be controlled centrally. Decentralisation is a necessary response to this increasing complexity and involves the delegation of decision-making responsibility by senior management to sub-ordinates. The structure is such that decision making is dispersed to various units within the organisation‚ with managers at various levels making key decisions relating to their centre of responsibility. These
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MANAGEMENT ACCOUNTING: CONCEPTS AND TECHNIQUES By Dennis Caplan DIVISIONAL PERFORMANCE MEASURES Chapter Contents: - Divisional Income - Return on Investment - Residual Income This chapter discusses three performance measures used to evaluate divisions and divisional managers. The term “division” in this chapter is shorthand for any responsibility center that is treated as a profit center or as an investment center. Investors and stock analysts use analogous measures to
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