Time Value of Money / Rates of Return

Instructions:

Assignment:

Answer the problems in the attached file.

Submit all answers in a single Excel file.

Be sure to show that you understand the concepts.

All calculations should be shown,step by step, done using Excel, and all answers should be thoroughly explained.

Reminder

In all your assignments, make sure that you:

1. Show all your calculations.

2. Use Excel in order to accomplish item 1 above.

3. Describe and justify each assumption you have made from the perspective of a manager. The commentary on the numbers is just as important as the numbers on this assignment. So be sure to discuss the findings from a management perspective.

4. Explain, support and justify every statement you make.

5. Support your conclusions with evidence (such as facts and statistics from reliable sources, quotes from the readings, or a well-reasoned logical argument). Examples from your own experience are also helpful.

Please bear in mind that analyses and conclusions are only as good as the data and assumptions that they are based on;

So ALWAYS support all of your numbers or calculations with reasoning and explanations, and be sure to provide sources for all of your data

PROBLEM ASSIGNMENT WEEK 4: TIME VALUE OF MONEY

You have been hired as the new Assistant Financial Manager for a small corporation located in Florida. Please answer all of the following problems and submit all answers in a single Excel File. Attach this Excel file to the “Week 4 Problem Set” link in the Assignment Folder.

1. You are the assistant Financial Manager for the Florida Sale Away Corporation. The Chief Financial Officer ask to you invest $15,000 of excess cash funds in an annuity which will return $26,300 dollars at the end of nine years. Or, as an alternative, consider investing the $15,000 in a FDIC insured commercial certificate of deposit at 8% for nine years. What will the certificate of deposit earn at the end of 9 years? Which of the two alternatives will yield the most income?
2. Your boss at Florida Sale Away Corporation has another investment project for you to complete. Our firm will receive a legal settlement on a patent issue in three years from now for $10,000. She asks you to calculate what this settlement is worth to the firm today if the discount rate is 7%.
3. The CEO of Florida Sale Away Corporation has decided, with the agreement of the Board of Directors, to buy an annuity for each of the corporate officers. He is considering the purchase of several twenty year ordinary annuities, each of which will be worth $30,000 at the end of the 20 years. He asked your boss what the present value of one of these annuities would be worth. Your boss, the Chief Financial Officer of the firm, asked you to calculate the present value of one of these 20 year ordinary annuities of $30,000 using an estimated 6% discount rate and email her your answer and an explanation of your findings.
4. An intern working at Florida Sale Away Corporation asked you to join him for lunch to discuss an inheritance of $5,000 that he recently received. He wondered if he deposited the $5,000 in a savings account that pays 8% interest per annum, how long would it take him to double his savings. Please help him out with your answer and explanation.
5. Florida Sale Away Corporation is considering the purchase of a small warehouse at a cost of $300,000. The firm plans to apply $60,000 as a down payment on the warehouse and borrow $240,000 from the bank to complete the purchase. The Chief Financial Officer asks you to determine how much will each monthly payment be on the debt assuming an interest rate of 5% assuming equal monthly payments for 30 years?
6. Tim, one of the long term employees at Florida Sale Away Corporation, meets with you to discuss his company retirement account. He has paid $250 per month into a 401K retirement plan. After 30 years, his plan has accumulated $500,000. He requests that you calculate for him his average annual rate of interest earned over the 30 years of participation in this plan?
7. Florida Sale Away Corporation Northeastern Division has sales of $525,000 in the year 2001. By 2012, sales had increased to $1,200,000. The Vice President of Marketing has requested that you calculate for her what the average annual rate of increase is on sales for the Northeastern Division.

8. Florida Sale Away Corporation has accumulated $500,000 in a contingency reserve account. The custodian of that special account has asked you how much more must be accumulated in the account over the next 10 years in order have a total of $2 million? The account earns 5% interest compounded annually.
Assignment:
Answer the problems in the attached file.
Submit all answers in a single Excel file.
Be sure to show that you understand the concepts.
All calculations should be shown, step by step, done using Excel, and all answers should be thoroughly explained.
Reminder
In all your assignments, make sure that you:
1. Show all your calculations.
2. Use Excel in order to accomplish item 1 above.
3. Describe and justify each assumption you have made from the perspective of a manager. The commentary on the numbers is just as important as the numbers on this assignment. So be sure to discuss the findings are a managemetn perspective.
4. Explain, support and justify every statement you make.
5. Support your conclusions with evidence (such as facts and statistics from reliable sources, quotes from the readings, or a well-reasoned logical argument). Examples from your own experience are also helpful.
Please bear in mind that analyses and conclusions are only as good as the data and assumptions that they are based on;
So ALWAYS support all of your numbers or calculations with reasoning and explanations, and be sure to provide sources for all of your data.

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