Calculate the future value of the given lump sums

Assignment Help Finance Basics

Reference no: EM131273872

Module- Case: THE TIME VALUE OF MONEY AND FINANCIAL STATEMENT ANALYSIS

Case Assignment

Solving Present Value and Future Value Problems

You are the CFO (Chief Financial Officer) of ABC Golf Equipment Corporation, a small company that sells golf equipment. Mr. Hillbrandt, the new CEO (Chief Executive Officer) has a marketing background and is trying to learn more about the financial side of running a business. He wants your help and asks for an introduction to the concept of time value of money.

The value of a typical corporate bond is the present value of an annuity plus the present value of a lump sum. Thus, if an individual does not understand how to calculate the present value of a lump sum or the present value of an annuity, it is difficult to determine the value of a typical corporate bond. Thus, in this case assignment, you will work through a variety of time value of money problems to illustrate the idea to the CEO.

The following websites include a number of formulae and financial calculators, including Present Value, Future Value, and Annuity:

Financial calculators. (2015). Calculator Soup. Retrieved from
https://www.calculatorsoup.com/calculators/financial/

Carther, S. (2015). Calculating the present and future value of annuities. Investopedia. Retrieved from
https://www.investopedia.com/articles/03/101503.asp

Required:

Compute and show your work for the following scenarios:

• Calculate the present value of the following lump sums:

o $100,000 to be received five years from now with a 5% annual interest rate
o $200,000 to be received 10 years from now with a 10% annual interest rate

• Calculate the future value of the following lump sums:

o $100,000 if invested for five years at a 5% annual interest rate
o $200,000 if invested for 10 years at a 10% annual interest rate

• Calculate the present value of these ordinary annuities:

o $100,000 to be received each year for five years with a 5% annual interest rate
o $200,000 to be received each year for 10 years with a 10% annual interest rate

• Calculate the future value of these ordinary annuities:

o $100,000 if invested each year for five years at a 5% annual interest rate
o $200,000 if invested each year for 10 years at a 10% annual interest rate

• Calculate the present value of these perpetuities:

o $100,000 to be received each year forever with a 5% annual interest rate
o $200,000 to be received each year forever with a 10% annual interest rate

Computations (use Excel).

1. Show the computations as required above.

2. Summarize the results in an easy to read table at the top of the spreadsheet or on a clearly labeled separate tab.

Memo (use Word).

Interpret the results from the computations and explain how the information is useful. Write a four or five paragraph memo to the CEO. Start with an introduction and end with a conclusion or recommendation. Each of the four or five paragraphs should have a heading.

Short Essay (use Word).

Do research and write a short essay to comment on the use of bonds by public corporations. The emphasis of the essay could be either

• A discussion of different types of bonds; or
• The use of bonds in different industries.

Start with an introduction and end with a summary or conclusion. Use headings. Don't forget to reference your sources. Maximum length of two pages.

Assignment Expectations

Each submission should include two files: (1) An Excel file; and (2) A Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.

Attachment:- Module_Information.pdf

Reference no: EM131273872

Questions Cloud

Membership rules used to state that to obtain employment : A labor union had once been whites only but is now integrated. Its membership rules used to state that to obtain employment through the union you had to be related to or recommended by a union member. Such a rule would now be: The pay that an employe..

What is the competitive market equilibrium : If stores act independently, what is the competitive market equilibrium? How many guards each store will hire? Show the results mathematically.

Whats is the strategy that is being practiced : What's is the strategy that is being practiced by the company - how is the strategy being practiced in alignment to the challenges/requirements of the "external environment'?

Persuasive speech using monroe motivated sequence : Create a 2 page formal preparation outline for your persuasive speech using Monroe's motivated sequence. Be sure to apply appropriate claims, data, warrants, and source citations while constructing your arguments. Use the sources you found for your..

Calculate the future value of the given lump sums : Calculate the present value of the following lump sums. Calculate the future value of the following lump sums. Calculate the present value of these perpetuities.

Government intervention on low income : Create a 16 slides PowerPoint presentation explaining government intervention on Low income rent controls and housing vouchers. The presentation should include a detailed speaker notes or voiceover including the following;

Before the norris-la guardia act-federal courts : Protected concerted activities under the NLRA, that covers all workers, unionized or not, include: Before the Norris-La Guardia Act, federal courts: Lockouts are legal as long as:

Appointed secretary of the treasury of a recently : You are appointed secretary of the treasury of a recently independent country called Rugaria. The currency of Rugaria is the lav. The new nation began fiscal operations this year, and the budget situation is that the government will spend 10 milli..

Create a table that contain the ratios for the various years : Create a table that contains the ratios for the various years. Then analyze the information. Look at the trends in the ratios and comment on how they compare to the industry benchmarks.

User Account

All Pages