Solution-Define the time value of money

Define the time value of money

Assignment Help Accounting Basics

Reference no: EM131792043

Part I: Complete the following table by inserting your responses to the questions. Cite any sources you use.

Define the time value of money.
Provide a real-world example for the time value of money.
Why is time such an important factor in financial matters?
How would you use the time value of money to your financial benefit?

Part II: Complete the following table by calculating the ratios.

Present Value

Amount	Compounding period	Rate of interest	Present value
$100,000	Annual	6% for 10 years
$70,000	Annual	4% for 15 years

Internal Rate of Return

Initial cost of investment	Periods of useful life	Estimated annual net cash inflow generated	Look-up table value	Rate of interest
$75,000	10	$10,190
$56,000	6	$12,115

Payback Period: Assume there are no income taxes for both scenarios.

Purchase price of equipment	Period of useful life	Annual revenue generated per year	Operating costs associated with revenue	Depreciation expense per year	Payback period result
$550,000	10 years	$100,000	$32,000	$55,000
$350,000	10 years	$80,500	$36,000	$35,000

Reference no: EM131792043

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Define the time value of money

Reference no: EM131792043

Reference no: EM131792043

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