Part I: Complete the following table by inserting your responses to the questions. Cite any sources you use.
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Define the time value of money.
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Provide a real-world example for the time value of money.
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Why is time such an important factor in financial matters?
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How would you use the time value of money to your financial benefit?
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Part II: Complete the following table by calculating the ratios.
Present Value
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Amount
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Compounding period
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Rate of interest
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Present value
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$100,000
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Annual
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6% for 10 years
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$70,000
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Annual
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4% for 15 years
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Internal Rate of Return
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Initial cost of investment
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Periods of useful life
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Estimated annual net cash inflow generated
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Look-up table value
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Rate of interest
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$75,000
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10
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$10,190
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$56,000
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6
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$12,115
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Payback Period: Assume there are no income taxes for both scenarios.
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Purchase price of equipment
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Period of useful life
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Annual revenue generated per year
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Operating costs associated with revenue
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Depreciation expense per year
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Payback period result
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$550,000
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10 years
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$100,000
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$32,000
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$55,000
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$350,000
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10 years
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$80,500
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$36,000
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$35,000
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