SECTION 2: TIME VALUE OF MONEY Decision problems in business usually involve a decision over whether to accept one alternative over another‚ or whether to implement a plan or not. In most cases‚ the effects of these decisions are felt in the future. Examples: Expand into a new market (geographical‚ consumer segment‚ etc.) or not? Now or later? Outsource production or keep it in-house? Grow organically or acquire a competitor? Or don’t grow at all? Purchase shares in Microsoft
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40 = C *annuity factor (15%‚ 7 years) $2.40 = C *4.160 C = $2.40 / 4.160 =.57692 million Skilboro machines Present Value = C * i $2.56 million = C .15 $2.56 = C *annuity factor (15%‚ 10 years)
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Introduction The time value 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 time value 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 valuable than the same amount in the future due to its capability of earning interest. For investors‚ this is single most
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Exclusions- items specifically removed from the tax base by law Deductions- subtracted from the tax base rather than fully excluded. Flat tax- one single rate applied to the entire tax base. Progressive tax- rates increase as tax base increases. (Federal income tax) Tax credit- authorized deduction in gross tax liability Real and personal property taxes- Real (real estate) Personal (difficult to enforce because property is easily concealed or moved‚ with the exception of vehicles which must
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linear function | a + bμx + cμx Where b&c are weights | Annuity Discount Factor | 1-DF or 1-_1_ k ( 1+r)n k | Variance (2) of combined lin funct (X‚Y) | b2V(x)+c2V(y)+2bc•Cov(x‚y) Where b&c are weights | Annuity Present Value | CF X ADF or | Covariance | x y COR(X‚Y) | Annuity Future Value | | Correlation (ρ) | | Annuity Payment | | Mean | fixi | Growing Annuity Present Value | | Variance Of a Sample (s2) | sqrt
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Halstead One of the most important concepts about saving and investing is the time value of money. It can be used to compare investment alternatives and to solve problems involving loans‚ mortgages‚ leases‚ savings‚ and annuities. This means money paid out or received in the future is not equivalent to money paid out or received today because inflation erodes money’s buying power. Basically‚ the power of time is on a person’s side and the premise that cash in hand today
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was taken in2001. The expansion project included linking of various major cities in India such as Vishakhapatnam‚ Pune‚ Kanpur‚ Vadodara and a few. The basic highlights of this project are as follows: • Funding is done through securitization of annuity payments which the GMR led consortium would obtain after the construction period. • Evaluation of various modes of PPP projects and ending up at BOT (build operate and transfer) mode. • Necessary support through state support agreement and NHAI authority
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company can pay him a lump sum retirement payments of Rs 2‚ 00‚000 or Rs 25‚000 life time annuity whichever he chooses. Mr. Sundaram is in good health and estimates to live for at least 20 more years. If his interest rate is 12%‚ which alternative should he choose? Ans Present Value of Annuity 25000*7.469*1.12 = 2‚09‚132 Which is greater than lump sum value of Rs. 2‚00‚000. So Annuity option is better. Q2. Assume that you have given a choice between incurring an immediate
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Date: 14/11/2012 52. Annuities: You are saving for the college education of your two children. They are two years apart in age; one will begin college 15 years from today and the other will begin 17 years from today. You estimate your children’s college expenses to be $23‚000 per year per child‚ payable at the beginning of each school year. The annual interest rate is 5.5 percent. How much money must you deposit in account each year to fund your children’s education
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1. The form of organization for a business is not an important issue‚ as this decision has very little effect on the income and wealth of the firm ’s owners. B. False 2. The major advantage of a regular partnership or a corporation as a form of business organization is the fact that both offer their owners limited liability‚ whereas proprietorships do not. B. False 3. Which of the following statements is CORRECT? A) One of the disadvantages of incorporating a business is that the owners then
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