The present date as savings to cover the expected liability

Assignment Help Financial Management

Reference no: EM131965861

Value of Money

Business decisions are based on the time value of money. Bonds, stocks, loans, and other business investments are valued by determining the present value of an expected cash flow, which is also called discounting the cash flow. The time value of money finds considerable application in the decision-making processes of a business.

In this assignment, you will apply the basic principles of the time value of money to business decisions.

Tasks:

Part 1:

You are the chief financial officer of a firm. The firm has an expected liability (cash outflow) of $2 million in ten years at a discount rate of 5%.

Calculate the amount the firm would need on the present date as savings to cover the expected liability.

Calculate the amount the firm would need to set aside at the end of each year for the next ten years to cover the expected liability.

Reference no: EM131965861

Questions Cloud

What is the predicted impact on the return of your portfolio : What is the predicted impact on the return of your portfolio? What is the predicted impact on the return of the index?

What is the modified duration of each portfolio : What is the modified duration of each portfolio? Which portfolio has the greater amount of convexity and why?

A lot of people love a cup of high-quality coffee : A lot of people love a cup of high-quality coffee bought at their favorite coffee shop on a daily basis. How much would you accumulate by the time you retire?

What is present value of the annual cash flow : What is the present value of the annual cash flow that is expected in 5 years from today?

The present date as savings to cover the expected liability : Calculate the amount the firm would need on the present date as savings to cover the expected liability.

Expected to generate no cash flows for several years : A building is expected to generate no cash flows for several years and then generate annual cash flows forever.

You are able to buy your dream car after graduation : How much do you need to invest today so that you are able to buy your dream car after graduation?

Plans to repay this loan by making special payment : Grace just borrowed 215,539 dollars. She plans to repay this loan by making a special payment of 18,778 dollars in 7 years and by making regular annual payments

What is present value of annual cash flow : What is the present value of the annual cash flow that is expected in 6 years from today?

User Account

All Pages