Time Value of Money Essay Example for Free

Time Value of Money Essay Time value of money is useful in making informed business decisions. For example the net present value method can be used to help decide the best alternative among multiple alternative uses of a firm or personal financial resources. By discounting various alternatives to their present value one can compare the alternatives. Time value of money can also answer such questions as what ones investment will be worth at a certain point of time in the future, assuming a certain interest rate. Time value of money can also be used to compute such useful information as car, mortgage and other loan payments. Another use of time value of money in accounting is reporting of certain long-term assets and liabilities. Time value of money is based on the principle of compound interest. Each time there is a compounding period the new principal is increased by the interest from the previous period. Converting Before Using the Tables When using the tables, you may need to convert if, for example, in a lump sum situation there are more than one compounding periods in a year. Or you may need to convert (to monthly compounding) if, for example, you are working with an annuity situation involving a car loan that involves monthly rather than annual periodic payments. You often need to convert whether it is a lump sum or an annuity situation. Do the following conversions before using the tables. See some of the examples which follow these notes. For semi-annual compounding [or for deposits every six months in an annuity], take the annual interest rate and divide it by 2. Take the number of years and multiply by 2. For quarterly compounding [or for quarterly deposits in an annuity] take the annual interest rate and divide it by 4. Take the number of years and multiply by 4. For monthly compounding [or for monthly deposits in an annuity] take the annual interest rate and divide it by 12. Take the number of years and multiply by 12. Lump Sum Amounts Future Value of $1 = Present Value X Future Value of $1 Table Factor Present Value of $1= Future Value X Present Value of $1 Table Factor Use the $1 table when you are dealing only with a lump sum amount. (However when you have an annuity in the problem, do not use the lump sum table; instead use the annuity table. Use the annuity table even if you are looking for a lump sum, as shown in No. 4 which follows these notes.) Notice that there are four variables with lump sum situations: Present Value, Future Value, Interest Rate, and Period. You need to know three out of the four to figure out an unknown. You saw above how to compute Present Value and Future Value. Now suppose you want to find the interest rate. Present Value Approach: PV / FV = computed PV Table factor Go to the PV table. Where the table factor and periods intersect is the interest rate. Use this same approach to figure the number of periods when you know the interest rate and PV and FV. Annuities An annuity means a series of equal periodic deposits, or rents which can be either payments or receipts; they are made at equal periodic intervals. Use the annuity tables when you are dealing with equal periodic payments or receipts at equal periodic intervals. Use Ordinary Annuity table for payments made at the end of the period. Use Annuity Due table for payments made at the beginning of the period. Future Value of an Annuity = Annuity Deposit X Future Amount of an Annuity Table factor. Present Value of an Annuity = Annuity Deposit X PV of Annuity Table Factor Note the Annuity Deposit may be either a payment or receipt. Now say you wish to find the amount of the deposit, which could be either a periodic payment like a car or mortgage payment, or a periodic receipt such winnings from the lottery or more realistically monthly withdrawls of cash during retirement. Rent or Payment/Receipt = PV / PV of annuity table factor or Rent or Payment/Receipt = FV / FV of annuity table factor You cannot just use either of the PV or FV approaches. Use the PV approach if PV is the given information. You would have to use the FV approach if FV is the given information. Often you use the present value approach though. For example if you are buying a car and want to figure out the car payments, the current price of the car is Present Value. It is assumed to be the cash-equivalent price. A Few Practice Problems 1. You want to know how much you should deposit in the bank each month in order to have $10,000 in four years. What type of problem is this? A. present value of an annuity B. present value of an amount C. future value of an annuity D. future value of an amount The correct answer is C. First you know this is an annuity because it involves equal periodic payments to the bank at equal intervals. You know it is future value because you are asked to find what future amount your annuity will grow to. Even though it is growing to a single amount, be sure to note that you are looking for the future value of an ANNUITY. 2. You want to know how much you should deposit in the bank now in order to have $10,000 in four years. What type of problem is this? A. present value of an annuity B. present value of an amount C. future value of an annuity D. future value of an amount The correct answer is B. 3. Someone will pay you $10,000 in four years. You want to know how much it is worth to you now, assuming a certain interest rate. What kind of problem is this? A. present value of an annuity B. present value of an amount C. future value of an annuity D. future value of an amount The correct answer is B. 4. What single amount do you have to deposit in the bank now in order to be able to withraw $200 a month for the next five years? What kind of a problem is this? A. present value of an annuity B. present value of an amount C. future value of an annuity D. future value of an amount The answer is A. Even though a single amount will be deposited, it is still an annuity problem. Hint: any time a problem involves equal periodic payments, use an annuity table. 5. When you were born your parents set up a trust fund designed to accumulate $88,000 by the time you are 50 years old. You are 34 years old today. If you negotiate getting the money today, what will you get? Assume an 8% interest rate and annual compounding. First realize you are looking for present value. Today and now are hints you want present value. Next realize you need to subtract your current age for 50 years to get the number of years, which would be 16 years in this problem. So PV = FV X PV table factor for 8% and 16 years 25,687 = 88,000 X .2919 6. You are very rich and will be retired soon. You want to take out $416,000 every six months for 6 years. You can get a 6% interest rate. How much do you need to deposit in the bank today to make this happen? You are looking for the Present Value of an annuity , since you want the amount to deposit TODAY, and you will be withdrawing equal periodic payments. So use the annuity table even though you are putting a lump sum in the bank. PV annuity = Deposit X PV annuity factor ( 3%, 12 semi-annual periods) = 416,000 X 9.9540 = 4,140,864, the amount you need to deposit today. 7. Trego County wants to raise $4,000,000 to finance the construction of a new high school. The school board wants to make semiannual payments to repay the loan over the next 15 years. What will be the amount of the payments assuming the interest rate of 10%?

Voting Requirements in the Economic Arena :: Political Economic Business Essays

Voting Requirements in the Economic Arena Status as an adult citizen in a political jurisdiction is seen as a sufficient condition to entitle one to a vote for a representative or participate in collective decision-making. Why not apply that same criterion and entitle adult citizens to voting rights to decide the composition of corporate boards of directors and decide other corporate matters? If mere adult status and citizenship is sufficient for decision-making in the political arena, why not in the economic arena as well? The easy answer/question is: why should anyone who has no stake or interest in a corporation have a say in its decision-making? The only people who should have voting rights are stockholders who have ownership rights in the corporation manifested by stock ownership. We generally agree that voting power should be proportional to their stake in the corporation, namely how many shares they own. If votes were not proportionate to one's stake (stock) in the corporation, including none at all, people might easily vote in ways that personally benefit them but harm the best interests of the corporation and other stockholders. For example, imagine if all Detroit citizens were entitled to vote on decisions made by General Motors. Suppose these voters managed to get on the ballot the question whether the corporation should give all of its profits to local charitable organizations or be plowed back into the corporation as retained earnings. It is not at all inconceivable that donating General Motors' profits to local charities might win by a landslide. People who have little or no stake in General Motors can be expected to behave differently than those who do, simply because their decisions are less costly to them - others bear the cost of their decisions. The identical cost/benefit assessment applies to decision-making in the political arena. Suppose a politician campaigned on the promise to increase spending on various social programs that would be funded with higher taxes. People who pay little or no taxes would see themselves as coming out ahead by voting for that politician. They would bear little or none of the costs, at least directly in the form of taxes, and they would benefit from the promised social spending increase. As such they could be counted upon to support such a politician. Survey polls showed a less-than-enthusiastic response to President George Bush's calls for tax cuts. Maybe a good part of the reason is the fact that so many Americans pay little or no income taxes.

Morality and Sacrifice Essay

â€Å"Sacrifice† is the surrender of a greater value for the sake of a lesser one or of a non value. Thus, altruism gauges a man’s virtue by the degree to which he surrenders, renounces or betrays his values (since help to a stranger or an enemy is regarded as more virtuous, less â€Å"selfish,† than help to those one loves). The rational principle of conduct is the exact opposite: always act in accordance with the hierarchy of your values, and never sacrifice a greater value to a lesser one. â€Å"Sacrifice† does not mean the rejection of the worthless, but of the precious. â€Å"Sacrifice† does not mean the rejection of the evil for the sake of the good, but of the good for the sake of the evil. â€Å"Sacrifice† is the surrender of that which you value in favor of that which you don’t. If you exchange a penny for a dollar, it is not a sacrifice; if you exchange a dollar for a penny, it is. If you achieve the career you wanted, after years of struggle, it is not a sacrifice; if you then renounce it for the sake of a rival, it is. A sacrifice is the surrender of a value. Full sacrifice is full surrender of all values. If you wish to achieve full virtue, you must seek no gratitude in return for your sacrifice, no praise, no love, no admiration, no self-esteem, not even the pride of being virtuous; the faintest trace of any gain dilutes your virtue. If you pursue a course of action that does not taint your life by any joy, that brings you no value in matter, no value in spirit, no gain, no profit, no reward—if you achieve this state of total zero, you have achieved the ideal of moral perfection. If you wish to save the last of your dignity, do not call your best actions a â€Å"sacrifice†: that term brands you as immoral. If a mother buys food for her hungry child rather than a hat for herself, it is not a sacrifice: she values the child higher than the hat; but it is a sacrifice to the kind of mother whose higher value is the hat, who would prefer her child to starve and feeds him only from a sense of duty. If a man dies fighting for his own freedom, it is not a sacrifice: he is not willing to live as a slave; but it is a sacrifice to the kind of man who’s willing. If a man refuses to sell his convictions, it is not a sacrifice, unless he is the sort of man who has no convictions. Sacrifice could be proper only for those who have nothing to sacrifice—no values, no standards, no judgment—those whose desires are irrational whims, blindly conceived and lightly surrendered. For a man of moral stature, whose desires are born of rational values, sacrifice is the surrender of the right to the wrong, of the good to the evil. The creed of sacrifice is a morality for the immoral—a morality that declares its own bankruptcy by confessing that it can’t impart to men any personal stake in virtues or values, and that their souls are sewers of depravity, which they must be taught to sacrifice. By its own confession, it is impotent to teach men to be good and can only subject them to constant punishment.

Critical Thinking And Social Media Defined - 1426 Words

Critical Thinking Social Media Defined According to criticalthinking.org, the definition of critical thinking is â€Å"that mode of thinking — about any subject, content, or problem — in which the thinker improves the quality of his or her thinking by skillfully analyzing, assessing, and reconstructing it. Critical thinking is self-directed, self-disciplined, self-monitored, and self-corrective thinking. It presupposes assent to rigorous standards of excellence and mindful command of their use. It entails effective communication and problem-solving abilities, as well as a commitment to overcome our native egocentrism and sociocentrism† (Our Concept and Definition of Critical Thinking). Social media is defined as a digital social media tools and located outside a formal Learning Management System. External social media sites include Facebook, Twitter, YouTube, Wikipedia, Flickr, LinkedIn, and Second Life. ‘‘Given that Facebook continues to be popular among college students, and that universities are interested in engaging and retaining students, it is important for those working in higher education to familiarize themselves with Facebook (and other such technologies) and to design and support interventions that meet students where they are, in order to help them get to where they are going.’’ (Junco, 2012, p. 170) Social Media in Higher Education Higher education professionals are familiar with communicating course content through e-mail and Learning Management Systems. 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