Use the time-value-of-money principles to evaluate a personal capital investment such as going to graduate school, funding a retirement account, purchasing a home, or other possible decision. Discuss how you approached the issues, how you used the time-value-of-money principles, and any insights that you gained from the analysis.

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Elin HesselLv2

15 Sep 2018

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Have you ever walked into a Wal-Mart or other big box store and been greeted by an older person who probably should have retired a decade ago? We all have at some time or another, and most of us think that when we're that age, we want to be taking vacations and spoiling our grand kids, not handing people shopping carts! Heck, none of us really -want to have to work during retirement. It's okay if you choose to work during retirement so that you have a reason to get up in the morning, but it should be your choice to do so.

Want to get rich? Use the power of compound interest working in your favor. A little bit of money invested well over a long period of time can equate to a lot of money! It's really a simple concept, but so many people fail to make use of the amazing power of compound interest. You can be very wealthy at retirement if you just put a relatively small amount of money away for retirement in a solid investment for a long period of time.

If you're under the age of 30, you can retire with a million dollars by age 65 by putting away a lot less money than you think! You'll need to put it in a solid investment account maybe a 401K- You just have to do the research and find a account at your work.. If you're really young, say age 20, you would only need to deposit very little into a good 401k to be a millionaire upon retirement.

You'll have to go find a savings calculator to figure out how much a month you need to put away to be a millionaire at retirement, but chances are it's a lot less money than you might think. Go to ANY OTHER FINANCIAL CALCULATOR. Please note two important things! 1) You must start as young as possible and 2) the return on your investment (percentage gain each year) makes an incredible difference in how you do. Someone who just puts money in CD's may average a 2% return and it would take much more money. If you get a professional broker or educate yourself, you should be able to get the traditional 7-8% return on your investments that someone using professional can usually get . This is why I always tell people to get the best advice they can through a professional broker as young as they can!

Your discussion is to tell me how much you should start investing now each month to have a cool million by retirement.

Make use of the power of compound interest in your financial life rather than letting the bank use compound interest against you through credit cards, mortgages and automobile loans. Compound interest is an amazing tool if you put away a percentage of your income away for retirement. When retirement occurs, you could do just about anything that you ever wanted--- just let it work for you and not somebody else.

rosejackal317

1.Financial mangers make decisions today that will affect the firm in the future. The dollars used for investment expenditures made today are different from the cash flows to be realized in the future. What are these differences? What are some of the techniques that can be used to adjust for these differences?

The Time Value of Money

Submit a 4-5 page report based on the following problem:
Mary has been working for a university for almost 25 years and is now approaching retirement. She wants to address several financial issues before her retirement and has asked you to help her resolve the situations below. Her assignment to you is to provide a 4-5 page report, addressing each of the following issues separately. You are to show all your calculations and provide a detailed explanation for each issue.

Issue A:
For the last 19 years, Mary has been depositing $500 in her savings account , which has earned 5% per year, compounded annually and is expected to continue paying that amount. Mary will make one more $500 deposit one year from today. If Mary closes the account right after she makes the last deposit, how much will this account be worth at that time?

Issue B:
Mary has been working at the university for 25 years, with an excellent record of service. As a result, the board wants to reward her with a bonus to her retirement package. They are offering her $75,000 a year for 20 years, starting one year from her retirement date and each year for 19 years after that date. Mary would prefer a one-time payment the day after she retires. What would this amount be if the appropriate interest rate is 7%?

Issue C:
Maryâs replacement is unexpectedly hired away by another school, and Mary is asked to stay in her position for another three years. The board assumes the bonus should stay the same, but Mary knows the present value of her bonus will change. What would be the present value of her deferred annuity?

Issue D:
Mary wants to help pay for her granddaughter Bethâs education. She has decided to pay for half of the tuition costs at State University, which are now $11,000 per year. Tuition is expected to increase at a rate of 7% per year into the foreseeable future. Beth just had her 12th birthday. Beth plans to start college on her 18th birthday and finish in four years. Mary will make a deposit today and continue making deposits each year until Beth starts college. The account will earn 4% interest, compounded annually. How much must Maryâs deposits be each year in order to pay half of Bethâs tuition at the beginning of each school each year?

chocolatechimpanzee729

MINICASE The MBA Decision Ben Bates graduated from college six years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he has narrowed his choice to either Wilton University or Mount Perry College. Although internships are encouraged by both schools, to get class credit for the internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Ben currently works at the money management firm of Dewey and Louis. His annual salary at the firm is $65,000 per year, and his salary is expected to increase at 3 percent per year until retirement. He is currently 28 years old and expects to work for 40 more years. His current job includes a fully paid health insurance plan, and his current average tax rate is 26 percent. Ben has a savings account with enough money to cover the entire cost of his MBA program. The Ritter College of Business at Wilton University is one of the top MBA programs in the country. The MBA degree requires two years of full-time enrollment at the university. The annual tuition is $70,000, payable at the beginning of each school year. Books and other supplies are estimated to cost $3,000 per year. Ben expects that after graduation from Wilton, he will receive a job offer for about $110,000 per year, with a $20,000 signing bonus. The salary at this job will increase at 4 percent per year. Because of the higher salary, his average income tax rate will increase to 31 percent. The Bradley School of Business at Mount Perry College began its MBA program 16 years ago. The Bradley School is smaller and less well known than the Ritter College. Bradley offers an accelerated one-year program, with a tuition cost of $85,000 to be paid upon matriculation. Books and other supplies for the program are expected to cost $4,500. Ben thinks that he will receive an offer of $92,000 per year upon graduation, with an $18,000 signing bonus. The salary at this job will increase at 3.5 percent per year. His average tax rate at this level of income will be 29 percent. Both schools offer a health insurance plan that will cost $3,000 per year, payable at the beginning of the year. Ben has also found that both schools offer graduate housing. His room and board expenses will cost by $2,000 per year at either school he attends. The appropriate discount rate is 6.3 percent. QUESTIONS

1.) How does Ben's age affect his decision to get an MBA?

2.) What other, perhaps nonquantifiable, factors affect Ben's decision to get an MBA?

3.) Assuming all salaries are paid at the end of each year, what is the best option for Ben from a strictly financial standpoint?

4.) Ben believes that the appropriate analysis is to calculate the future value of each option. How would you evaluate this statement?

5.) What initial salary would Ben need to receive to make him indifferent between attending Wilton University and staying in his current position?

6.) Suppose, instead of being able to pay cash for his MBA, Ben must borrow the money. The current borrowing rate is 5.4 percent. How would this affect his decision?

amethystweasel642

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