Time Value of Money

Instructions

For this milestone, submit a draft of the Time Value of Money section of the final project, along with your supporting explanations. Base your calculations on the data provided in this case study. Be sure to substantiate your claims.

Submit your calculations on the designated tab of the Final Project Student Workbook and your supporting explanations as a Microsoft Word document.

For additional details, please refer to the Milestone One Guidelines and Rubric document. The paper must be submitted as a 2- to 3-page Microsoft Word document in APA style, not including your calculations. Do not make plagiarism and I will check it by the turnitin.

Specifically, the following critical elements must be addressed:

I. Time Value of Money

A. Calculate the following time value of money figures:

1. Calculate the present value of the company based on the given interest rate and expected revenues over time.

2. Suppose the risk of the company changes based on an internal event. Recalculate the present value of the company.

3. Suppose that a potential buyer has offered to buy this company in five years. Based on the present value you calculated above, what would be a reasonable amount for which the company should be sold at that future time?

B. What are the implications of the change in present value based on risk? In other words, what does the change mean to the company, and how would you, as a financial manager, interpret it? Be sure to justify your reasoning.

C. Based on the future value of the company that you calculated, and being mindful of the need to effectively balance portfolio risk with return, what recommendation would you make about purchasing the company as an investment at that price? Be sure to substantiate your reasoning.

Critical Elements Proficient (100%)
Time Value of Money: Figures Accurately calculates requested figures
Time Value of Money: Implications Analyzes implications of change in present value based on risk, justifying reasoning
Time Value of Money: Future Value Makes recommendation about purchasing company at future price, substantiating claims
Articulation of Response Submission has no major errors related to citations, grammar, spelling, syntax, or organization

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