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Submitted by jasy915 on May 14, 2008
Category: Business
Words: 7297 | Pages: 30
Views: 139
Popularity Rank: 83,373
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THE TIME VALUE OF MONEY
FOCUS
This chapter develops and applies time value formulas. The focus is on using time value concepts to solve business problems.
OUTLINE
I. OUTLINE OF APPROACH
A brief explanation of the fact that money promised in the future is worth less than money in hand today.
Four kinds of problems and using time lines.
II. AMOUNT PROBLEMS
A. The Future Value of an Amount
The expression relating future and present values of a single amount is developed in terms of the future value factor and the associated table.
Problem solving technique is introduced.
Applications include deferred payment terms as the equivalent of cash discounts and the opportunity cost rate.
Financial calculators are introduced and instruction is provided on their use in solving time value problems.
B. The Expression for The Present Value of an Amount
An alternate formulation emphasizing the present value in terms of the future value. More on technique.
III. ANNUITY PROBLEMS
A. Annuities
The concept of an annuity and its present and future values.
B. The Future Value of an Annuity - Developing a Formula
The FVA expression, factor and tables are developed.
C. The Future Value of an Annuity - Solving Problems
Problem solving technique, the sinking fund concept, using a financial calculator for annuity problems.
D. Compound Interest and Non-Annual Compounding
Compound interest concepts and how to handle non-annual compounding in problems. The EAR and APR.
E. The Present Value of an Annuity
The formula, factor, and table are developed.
...
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