User Account

All Pages

the time value of money ,, Financial Management

Assignment Help:
Calculate the present value and determine the npv, Financial Management.

Assume today is 3 December 2009. Helen is 30 years old and has a Bachelor of Business. She is currently employed as a personal banker for ANZ banking group in Sydney and earns $38000 a year that she anticipates will grow at 3% per year. Helen hopes to retire at age 65 and has just begun to think about her future.

Helen has $75000 that she recently inherited form her Uncle John. She invested this money in a five year term deposit with her bank. She is considering whether she should further her education and would use her inheritance to pay for it.

Helen has investigated a couple of options in this regards, and is asking for your help as a financial planner. She has already been accepted to both of these programs and could start either one soon.

The first option that Helen is considering is attaining a certification in IT. The certificate would automatically promote her to a personal manager in ANZ. The base salary for personal manager is $10 000 more than what she currently earns and she anticipates that this salary differential will grow at a rate of 3% a year as long as she keeps working. The certificate in IT program requires the completion of 20 online courses including a score of 80% or better in the exam at the end of each course. She has learned that the average length of time required to finish the program is one year. The total cost of the program is $5000, with payment due when she enrols in the program. Because she will do all the work for the certification in her own time, Helen does not expect to lose any income during the period of study.

The second option is going back to University to study for a Mater of Professional Accountant (MPA). With an MPA degree, Helen expects to be promoted to managerial position. The managerial position pays $20 000 a year more than her current position. She expects that this salary differential will also grow at a rate of 3% a year for as long as she keeps workings.

The evening program will take three years to complete, costs $25 000 per year, with payment due at the beginning of each of the 3 years she is at the university. Because she will attend classes in the evening, Helen does not expect to lose any income while she is studying for her MPA.

Note:
In answering the following questions you should show your workings and or the calculator key strokes used.
Round your answers to two decimal places
You are permitted to make assumptions in arriving at your answer provided that you do not assume away details that have been provided as part of the question

Requires:

1, Determine the interest rate Helen is currently earning on her inheritance by going to the Reserve Bank of Australia and click on the Cash Rate link in the key information section. Choose the market rate at 3 December 2009. Use this interest rate as the discount rate for the remainder of the problem.

2. Create a timeline of expected cash flow for the following 3 scenarios in Excel for Helen''s current situation, as well as the certificate program and MPA degree option , using the following assumptions:

a) Salaries for the year are paid only once, at the end of the year.

b). The Salary increase becomes effective immediately upon graduating from the MPA or being certified. However although the increases become effective immediately, the salaries are paid at the end of the year, the first salary increase will be paid exactly one year after graduation or certification.

3. Calculate the Present Value of salary differential for completing the certification program. Subtract the cost of the program to get the MPA of undertaking the certification program.

4, Calculate the present value of the salary differential for completing the MPA. Calculate the present value of the cost of the MPA. Based on your calculations, determine the NPV of undertaking the MPA.

5, Base on your answer to question 3 and 4, what advice would you give to Helen? What if the two program are mutually exclusive? If Helen undertakes one of the programs, there is no further benefit to undertaking the other program. Would your advice change?



Related Discussions:- the time value of money ,

Defqa, Ask question #Minimum 100 words acceptedaqs #

Ask question #Minimum 100 words acceptedaqs #

Financial ratio , #qCash Dividend Ratio uestion..

#qCash Dividend Ratio uestion..

Application of concept of tvm, Q. Application of concept of TVM Sometim...

Q. Application of concept of TVM Sometime the financial manager has to deal with the varying situation of the decision making where the concept of TVM needs to be applied in th

Explain the basis risk, Explain the Basis Risk Basis risk considers to ...

Explain the Basis Risk Basis risk considers to the floating rates of two counterparties being pegged to two dissimilar indices.  In this situation, as the indexes are not compl

Case study, Suggestion regarding Credit limit. Should it be approved or not...

Suggestion regarding Credit limit. Should it be approved or not, what should be the amount of credit limit that electronics give to Booth Plastics.

Calculate the net present value of cash flows, Assume a firm has the follow...

Assume a firm has the following cash flows for the next five years: $50,000, $100,000, $150,000, $200,000, and $300,000. We start this business with an initial investment of $250,0

State about the audit plan contents, State about the Audit plan contents ...

State about the Audit plan contents 1. Report requirements and terms of reference. 2. A review of business and financial position, reviewing why changes had occurred in curr

Standard & poor’s analyze in determining the credit rating, What factors do...

What factors does Standard & Poor’s analyze in determining the credit rating it assigns a sovereign government? Answer: In rating a sovereign government, Standard & Poor’s anal

Eurodollar, Eurodollar U.S. currency held on deposit in banks located ...

Eurodollar U.S. currency held on deposit in banks located outside the United States, mainly in Europe. Eurodollars are mostly used for settling international transactions outs

Government securities , The RBI, on behalf of the government, issues ...

The RBI, on behalf of the government, issues all T-Bills and Government dated securities. Being risk-free securities, they set the benchmark for the interest rate

Write Your Message!

Captcha
Order Assignment

Featured Services

Order Now

Popular Subjects

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd