Question

In: Accounting

A demonstration of time value using three alternative fact patterns using a $500,000 principal investment over...

A demonstration of time value using three alternative fact patterns using a $500,000 principal investment over three different time periods and at three different rates. Consider using an annuity under at least one of the fact patterns. (managerial accounting)

Solutions

Expert Solution

Please find the demonstration of time value using three alternative fact patterns using a $500,000 principal investment over three different time periods and at three different rates. Consider using an annuity under at least one of the fact patterns.

The time value of money is a concept that money available at the present time is worth much more than the identical sum in the future due to its potential earning capacity. This finance principle primarily holds that provided money must earn interest which ultimately means that any amount of money is worth more the sooner it is received.


Related Solutions

how do international trade patterns change over time?
how do international trade patterns change over time?
How has the study of trade patterns evolved over time, and in the light of empirical...
How has the study of trade patterns evolved over time, and in the light of empirical testing of trade models
3. Future value The principal of the time value of money is probably the single most...
3. Future value The principal of the time value of money is probably the single most important concept in financial management. One of the most frequently encountered applications involves the calculation of a future value. The process for converting present values into future values is called   . This process requires knowledge of the values of three of four time-value-of-money variables. Which of the following is not one of these variables? The duration of the deposit (N) The trend between the...
If there is no ratchet agreement, what will be the post‐money value after the $500,000 investment?
A venture with 2 million total common shares – 1.4 million owned by the entrepreneur and 0.6 million by an angel investor – had a post‐money value of $8 million after its last (and only) round of outside financing. The company has run into some development delays and needs to raise additional capital. A new investor offers $500,000 in exchange for 200,000 new common shares.If there is no ratchet agreement, what will be the post‐money value after the $500,000 investment?(Note:...
You are considering an investment of $500,000 at time zero for machinery and equipment. Annual revenue...
You are considering an investment of $500,000 at time zero for machinery and equipment. Annual revenue produced by the machinery is estimated to be $400,000 with annual operating costs of $140,000. The investment requires an initial investment of $200,000 for working capital at time zero. The working capital return is equal to the initial working capital investment at the end of the project (8th year). Salvage value of the machinery and equipment is expected to be zero. The minimum After...
You are considering an investment of $500,000 at time zero for machinery and equipment. Annual revenue...
You are considering an investment of $500,000 at time zero for machinery and equipment. Annual revenue produced by the machinery is estimated to be $400,000 with annual operating costs of $140,000. The investment requires an initial investment of $200,000 for working capital at time zero. The working capital return is equal to the initial working capital investment at the end of the project (8th year). Salvage value of the machinery and equipment is expected to be zero. The minimum After...
Numerical data, measured in quantitative terms, reveal trends and patterns over time. For, example testing a...
Numerical data, measured in quantitative terms, reveal trends and patterns over time. For, example testing a new fall-prevention program within your hospital would require you to obtain a baseline fall rate before the program and then again after implementation of the program. Statistically, you could compare rate of falls before the new program with the rate of falls after the new program. Describe another example of quantitative research design. How do quantitative research designs improve quality of care and health...
Time Value of Money Calculations Given: Principal = $1000 Future Value = $1000 Interest rate =...
Time Value of Money Calculations Given: Principal = $1000 Future Value = $1000 Interest rate = 10% Annuity Pmt = $1000 N = 10 years 1. FV of Lump Sum = ? 2. PV of Lump Sum = ? 3. FV of Annuity = ? 4. FV of Annuity Due = ? 5. PV of Annuity = ? 6. PV of Annuity Due = ? 7. PV of Perpetuity = ?
1 List the four principal factors that affect the growth in GDP over time and briefly...
1 List the four principal factors that affect the growth in GDP over time and briefly describe what each means. (b) For each factor, state one government policy that could increase that factor’s contribution to GDP growth. 2 Why should workers care about labor productivity growth?
An alternative to using logarithms to determine the amount of time that it would take for...
An alternative to using logarithms to determine the amount of time that it would take for a lump-sum investment at a particular compound interest rate to grow to a certain value would be to use a spreadsheet to list the value of the investment after each compounding period for as many times as is necessary. Suppose that you receive $1,000 as a gift and decide to invest it in a fund that pays a particular interest rate compounded quarterly. (6.91%...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT