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Time Value of Money Worksheet with Answers, Exercises of Finance

Time value exercise solutions. simple calculations on how a price is increase/decreased after some years of buying it

Typology: Exercises

2020/2021

Uploaded on 04/20/2021

ashnay
ashnay 🇺🇸

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TIME VALUE WORKSHEET
Define: Time The end of a year or period
MARR Minimum Attractive Rate of Return
Interest %I Rate lender charges to use their money
Discount Rate Is an interest rate, but used to discount FV to PV
Opportunity Cost The cost to use your own money
PV Present Value
FV Future Value
AV Annual Value
PMT Payment, monthly
MV Monthly Value, same as PMT
1. You have $30,000 to buy some cows. If you hold off for 5 years, how much will you
have then at 6% interest?
Time Line:
Convert: PV to FV
Use Table: PV to FV Annual
Calculation: $30,000 x 1.3382 = $40,146
2. The book value of a tractor is $35,000 at the end of year 7. At 8% MARR, this would
compensate for how much of its price?
Time Line:
Convert: FV to PV
Use Table: FV to PV Annual
Calculation: $35,000 x 0.5835 = $20,422
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TIME VALUE WORKSHEET

Define: Time The end of a year or period MARR Minimum Attractive Rate of Return Interest %I Rate lender charges to use their money Discount Rate Is an interest rate, but used to discount FV to PV Opportunity Cost The cost to use your own money PV Present Value FV Future Value AV Annual Value PMT Payment, monthly MV Monthly Value, same as PMT

  1. You have $30,000 to buy some cows. If you hold off for 5 years, how much will you have then at 6% interest? Time Line:

Convert: PV to FV

Use Table: PV to FV Annual

Calculation: $30,000 x 1.3382 = $40,

  1. The book value of a tractor is $35,000 at the end of year 7. At 8% MARR, this would compensate for how much of its price? Time Line:

Convert: FV to PV

Use Table: FV to PV Annual

Calculation: $35,000 x 0.5835 = $20,

  1. You need to borrow $50,000 for new milking equipment. If you borrow at 9% interest for 4 years, what is the annual payment? Time Line:

Convert: PV to AV

Use Table: PV to AV Annually

Calculation: $50,000 x 0.3087 = $15,

  1. Calculate the monthly payment from above.

Time Line:

Convert: PV to PMT

Use Table: PV to PMT Monthly

Calculation: $50,000 x 0.02489 = $1,

  1. A cow will net $400/yr plus $500 salvage at the end of three (3) years. What is the most you can pay for her and earn 12% on the investment each year? Time Line:

Convert: AV to PV ($400/yr) FV PV ($500 salvage)

Use Table: AV to PV Annually & FV to PV Annual

Calculation: $400 x 2.4018 = $960. $500 x 0.7118 = $355. Sum $1,316.

  1. From 1975 to 2000 per capita consumption of cheese, has increased from 14.3 to 29.8 pounds. Calculate the annual rate of increase. Time Line:

Known PV FV N

To be determined %I

FV/PV = 2.

Actually 3%