Time Value of Money Assignment Help
Time value of money (TVM) is a financial theory that describes the idea of the present value of money is more than the same amount in the future due to its potential ea
ing capacity. The finance principle is based on the fact that provided money can ea
interest, any amount of money is worth more the sooner it is received.
We all are aware of the fact that money deposited in savings account will ea
interest. So, anyone invests in the saving accounts, would prefer receive money today rather than the same amount in the future.
![Time Value of Money Assignment Help]()
An Example:
As an example Mark Fuller describes, 100 dollars of today's money invested for one year and ea
ing 5 percent interest will be worth 105 dollars after one year. Therefore, 100 dollars paid now or 105 dollars paid exactly one year from now both have the same value to the recipient who assumes 5 percent interest; using time value of money assignment help terminology, 100 dollars invested for one year at 5 percent interest has a future value of 105 dollars.
If you want to present excellent quality assignment on the time value of money, you can take professional time value of money assignment help from the experts.
Sample Question and Solution of Time Value of Money Assignment
ACC202: Corporate Accounting
Question:
This will be a group assignment consisting of a minimum 3 and maximum four students. The topic that relates to the assignment is on Corporate Fair Value Reporting. The group will be required to investigate any 2 ASX listed companies on the above topic.
Answer:
Introduction
Evolution has been an integral part of the accounting landscape ever since its inception. The objective of accounting is to maintain the records of all financial transactions whether of an entity or individual, in a summarized and classified manner to make sure that the books of accounts reflect true implications of these transactions. Over the years as mentioned the subject, i.e. accounting has undergone a number of changes. At the very beginning, accounting was primarily about keeping simple and plain records of financial transactions. With passage of time new and important concepts were introduced in accounting and financial reporting to improve the efficiency and effectiveness of bookkeeping system. Read More...
List Of Solved Assignment Samples Written By PhD Experts
Why is the time of value of money important in capital budgeting decisions?
Writing assignment on the time value of money also involves describing its significance in business. Only the experts, who have extensive knowledge on the topic, can help you do the job. So time value of money assignment help is a wiser option to choose.
When certain amount of money invested in the project, may be as an expansion, a strategic acquisition or just a purchase of the new piece of equipment. It may take years before that project begins producing a positive cash flow. The business requires confirming that whether those future cash flows are worth the upfront investment. This is the reason the time value of money is significant to capital budgeting.
The methods that companies apply:
Numerous companies utilize the time value of money to make suitable decision on capital projects as well as between competing projects. Net present value and Inte
al Rate of Retu
(IRR) are two most popular methods that companies utilize. You add up the present value of all cash flows involved in the project, if the total is greater than zero, then the project is worth doing. In the IRR method, you determine the rate of retu
that would make the present value of the future cash flows equal to your upfront cash. If the inte
al rate of retu
if greater than your discount, the project is worth going.
Future value basics
The two options are exhibited in front of you. Option A: Receive $10,000 now and Option B: Receive $10,000 in three years.
If you decide to go with Option A, and invest the total amount at a simple annual rate of 4.5 percent, your investment will reach $10,450 by end of the year. This amount is considered as the future value of your investment. The calculations are done by multiplying the principal amount $10,000 b the interest rate of 4.5% and then adding the interest gained to the principle amount,
The equation of Future value:
Or
How to calculate future value:
By implementing the future value equation, you can get the value of the investment in the first year:
($10,000X 0.045) + $10,000
= $10,450
For further time value of money assignment help, if you invest $10, 450 at 4.5 percent interest rate for another rate. So after another year, how much would you have?
If you want to lea
the calculations of future value on your own, you can have one-to-one interaction with experts who have specialized knowledge in finance concepts. For time value of money assignment help, here we are demonstrating a few calculations of future value,
As mentioned above, after another year of investment of how much would you receive?
To calculate this, you would take the $10,450 and multiply it again by 1.045 (0.045 + 1).
Future value of investment at end of the second year:
$10,450 X (1+ 0.045)
= $10,920.25
The above result is equivalent to the following equation:
$10,920.25 = $10,000 X (1+ 0.045) X (1+ 0.045)
The reason can be described by the rule of exponents (maths), where the multiplication of like term is equivalent to adding their exponents. In the above equation, the two like terms are (1 + 0.045), and the exponent of each is equal to 1. Hence, the equation would take shape like this,
= $10,920.25
So, you can understand by the equation that we don’t need to calculate the future value of first year to find out the second year. If you already know how many years you would like to hold present amount money in an investment. You can easily calculate future value by the equation.
Check Out The Top Course Code For Time Value Of Money Assignment
Present value basics
If you receive $10,000 today, generally the present value would be $10,000. The reason is, what your investment gives you how if you were to spend it today. If you were about to receive the same amount in a year, the present value would not be $10,000, because you don’t have it in your hand now in the present.
If you want to find out the present value of the $10,000, you need to presume that the $10,000 is the total future value of an amount as your investment.
If you want to calculate present value, you need an equation. If you find difficulties in understanding the functions of equations, you take immediate assistance from time value of money assignment help.
The equation of Present value:
To calculate present value, you need to subtract accumulated (hypothetical) interest from the $10,000. You can discount the future payment amount ($10,000) by the interest rate for the period. All you need to do is to rearrange the future value equation above so that you may solve for PV.
Future value equation,
Final equation of present value,
Or
How to calculate present value:
If you would go with Option B, you have $10,000 to be received in three years measure the same as the future value of an investment. At the two-year mark, the present value of the $10,000 to be received in one year,
The equation goes as follows,
Present value of future payment at end of two years,
= 9569.38
Following the rule of the exponents, you don’t have to calculate the future value of the investment every year. You can easily calculate today’s present value of the $10,000 expected from three years investment ea
ing 4.5%.
= $8762.97
More suitable choice between future value and present value:
Now, you know which a better choice is for you between Option A and Option B. If see review the situation, choosing Option B is taking $8,762.97 now and then investing it for three years. But if would go with Option A, the above calculation results depict that Option A is not only better for now, because you can have $10,000 right now but also it offers you $1, 237.03 ($10,000 - $8,762.97) more in cash. In future after investment, it gives you a future value that is $1,411.66 ($11.411.66 - $10,000) more than the future of Option B.
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Most Popular FAQs Searched By Students:
Q1. Why is time value money necessary?
Ans.: The Time Value Money concept is fundamental in wealth and finance. The reason is quite simple: a dollar in hand today is worth more than a dollar promised in the future. The money that you earn today can be used for investment or capital gains. As commodity prices rise with every passing day, inflation is bound to bring down the value of the money earned. The amount of work that you need to put in to make a penny will increase manifold in the future.
Q2. How does time value of money help in decision-making?
Ans.: Understanding the present value of money and scoping out current cash flow can help one estimate the future amount of their wealth quite accurately. Time is money, and the TVM concept helps one realize just that.
The time value of money is what investors dwell deeply before investing and utilizing their wealth. TVM enables one to determine the net worth of the future returns of an investment.
Q3. What is a capital budgeting method that ignores the time value of money?
Ans.: There are several capital budgeting methods utilized in the financial domain. Capital budgeting techniques are the processes that businesses employ to evaluate potential major projects and investments.
One method, in particular, ignores that time value of money concept entirely and instead focuses on the number of years required to recover the invested funds. This is the payback period technique, which focuses on the recovery aspect and not on the profitability of an investment.
Q4. Can I get native writers for my time value money assignment?
Ans.: Most assignment services claim to provide the best writers but fail to live up to such tall claims. Expect nothing of that sort with MyAssignmenthelp.com as we have a whole bunch of brilliant minds working in our midst. Highly qualified and experienced native writers will give it their all to craft perfect solutions for your time value of money assignments.
Q5. What are the five methods of capital budgeting?
Ans.: The five primary methods in the capital budgeting process are:
- Net Present Value
- Payback Period
- Profitability Index
- Internal Rate of Return
- Accounting Rate of Return
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