Pv and Fv

The case meets us with the future value and present value approaches. It tries to connects us with the time-value-of-money scenarios and the basic concepts of it. Future value and Present value are presented in the case in different scenarios, so the case gives to the reader a full picture of several approaches and how to easily summerize all the knowledge through different scenarios. The case gives the opportunity for the readers to learn about FV and PV through different examples and scenarios. The case gives the opportunity for the readers to learn how to apply the foregoing time-value-of-money insights through very simple, but useful ways.To highlight the underlying logic and connections of present and future values, the case presents four useful time-value-of-money reference tables. Cash flows, future value, present value and financial analysis are also covered by case.

Cash flow is a valuable technique for valuing a business, allocating useful resources, and comparing important investments, so that we can get a full picture of what we need.

When the fixed rate of return on a security is set, in that case the future value of an investment is considerable. The future value can be used for bonds, different interest accounts, deposit certificates, other assets, etc.

Financial analysis is important in all aspects of business, but it gives and insight on after-the-fact look at performances inside the company (financial and managerial performances). It identifies the stability, liquidity and profitability of the investments. FV are discounted at a discount rate. So based on that the PV of the future cash flows gets lower when the discount rate gets higher and vice versa.

1. a) 15.000*1,4693 = 22040

Shortfall of 2.960.

b) 500*6,336=3.168

22.040 + 3.168 = 25.208

Enough, 25.208 on a 40th birthday.

2. a) I would be willing to accept 25.790.000 today instead of 50 million in four years.

50.000.000 x 0.5158 = 25.790.000

b) 25.790.000 \ 2.690 =...