The University of Phoenix simulation “Utilizing the Time Value of Money” focused on the financial principles used to evaluate and determine whether to outsource manufacturing or to invest in in-house operations. The simulation depicted real-life examples of how investment choices impacts the Net present value (NPV), internal rate of return (IRR), and cost of capital. The objective of the simulation was to apply time value of money principles to evaluate the investment alternatives of Cracker Pop. In each of the simulation’s scenarios, net present value and internal rate of return were used to determine the optimal choice pertaining to outsourcing or investing in a new plant for its card operations. Outsourced production issues arose in the second scenario introducing debt-equity mix in the evaluations. A drop in long-term interest rates made it more lucrative for InnoVista to invest in an additional plant with a debt-equity mix of 60% - 40%. The third scenario involved evaluating the criterion to increase production. Maintaining the same debt-equity mix as the second scenario, upping manufacturing to 900,000 units, and adding an additional shift proved to be the most optimal approach for InnoVista to meet consumer demands for its Cracker Pop cards as it resulted in a low cost per capital while also producing a high NPV. Aside from NPV and IRR, companies also use the payback period to evaluate possible investments. The payback period estimates the length of time required to recover the cost of an investment and addresses how desirable an investment is over the long-term. The payback method does have disadvantages in that it ignores time value of money principles and fails to recognize the profitability and risk of an investment. “Because of these reasons, other methods of capital budgeting like net present value and internal rate of return are generally preferred” (Answers Corporation, 2007). Although net present value (NPV) is a preferred criterion in...

...TIMEVALUE OF MONEYTimevalue of money is useful in making informed business decisions. For example the "net present value method" can be used to help decide the best alternative among multiple alternative uses of a firm or personal financial resources. By discounting various alternatives to their "present value" one can compare the alternatives. Time...

...Finance21
Prof. Khen Enriquez
This article will explain the financial concept of timevalue of money. The overview provides an introduction to the principles at work when money grows in value over time. These principles include future value of money, present value of money, simple interest and compound interest. In addition, other concepts that...

...concept of the timevalue of money and the importance of this concept in business. Also, we will provide a demonstration of the use of the formula used to calculate the present and future values of money to get the present value of $100 using different periods of time and interest rates.
TimeValue of Money
In the world of business, it is essential...

...Introduction
The timevalue of money is an important concept in financial management. It can be used to compare investment alternatives and to solve problems involving loans, mortgages, leases, savings, and annuities. The timevalue of money can be defined as the value of money received today instead of in the future. This is based on the premise that cash in hand today is more...

...TimeValue of Money
“Money has a timevalue associated with it and therefore a dollar received today is worth more than a dollar to be received in the future” (Block, Hirt, 2005). The timevalue of money may be based on the concept that one would prefer to receive a fixed payment today rather than the same fixed payment at a future date. This paper discusses some of...

...FINANCE
TIMEVALUE OF MONEY
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.
Timevalue of money
Today’s financial managers often have to compare cash payments that occur on different dates. To make optimal decisions, the...

...ACFI 340 – TAKE HOME QUIZ - FALL, 2011
Below you will find a series of independent questions involving present value concepts. Show all factors used in present value computations and indicate the table that was used (FV of $1, PV of $1, etc). If you use a financial calculator, show the key strokes you used to compute the answer: N, i/y, PV, FV and PMT
Please download a copy of this quiz and type your answers after each question. Each student should design...

...TimeValue of Money
The timevalue of money (TVM) or, discounted present value, is one of the basic concepts of finance and was developed by Leonardo Fibonacci in 1202. The timevalue of money (TVM) is based on the premise that one will prefer to receive a certain amount of money today than the same amount in the future, all else equal. As...

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