Why do we say money has time value

Assignment Help Business Management
Reference no: EM13849761

1. Why do we say money has time value?

2. Why is it important for business managers to be familiar with time value of money concepts?

3. Define Present Value.

4. Define Future Value.

5. What are present value and future value interest factors? (as in PVIF and FVIF)

6. (calculating future value)  You buy a 6 year, 8% CD for $1,000.  Interest is compounded annually.  How much is it worth at maturity?

7. (calculating present value)  What's the present value of $1,000 to be received in 8 years?  (Your required rate of return is 7% a year.)

8. (calculating the rate of return)  A friend promises to pay you $600 two years from now if you loan him $500 today.  What interest rate is your friend offering you?

9. (calculating the future value of an annuity)  If you invest $100 a year for 20 years at 7% annual interest, how much will you have at the end of the 20th year?

10. (calculating the present value of an annuity)  How much would you be willing to pay today for an investment that pays $800 a year at the end of the next 6 years?  (Your required rate of return is 5% a year.)

Case Study Tasks:

1. Refer to the Case Study topic lecture on the Week 5 Content page. Using the information you obtained last week, complete the Part 3, Ratio Analysis portion of the case study report and submit it along with your regular homework (use a separate file for the financial overview).  Note that your Ratio Analysis should include ratios for the years 2011 and 2012 and should include comparisons between the company you are analyzing and the company selected for comparison.

Organize your ratio analysis per the following outline:

(1) Liquidity

- Current ratio

- Quick ratio

Comments on liquidity

(2) Asset management

- Total Asset turnover

- Average collection period (ACP)

Comments on asset management

(3) Debt management

- Debt ratio

- Times interest earned

Comments on debt management

(4) Profitability

- Net profit margin

- Return on Assets (ROA)

- Return on Equity (ROE)

- Extended Du Pont equation

Comments on profitability to include your comments on the sources of ROE

revealed by the Du Pont equation

(5) Market value ratios

- PE ratio

- Market to book ratio

Comments on the market value ratios

Reference no: EM13849761

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Why do we say money has time value : 1. Why do we say money has time value? 2. Why is it important for business managers to be familiar with time value of money concepts?
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