Financial applications of the time value of money


Prepare a 500 word analysis about the article.

Include the major point(s) made, application(s) to Financial Management, the any of the concepts reinforced from the class objectives, and a summary.

Here are the class objectives:

Problem 1: TIME VALUE OF MONEY, VALUATION, AND RATE OF RETURN

A. Calculate present value and future value for single amounts, annuities, and uneven streams of cash flow.

B. Identify various financial applications of the time value of money.

C. Calculate the present value of bonds, preferred stocks, and common stocks using required rates of return (yield to maturity for bonds).

Problem 2: CAPITAL BUDGETING

A. Describe the importance and role of capital budgeting in organizations.

B. Make capital budgeting decisions utilizing alternative capital budgeting decision models and risk analysis techniques.

C. Prepare a lease versus buy analysis to determine the advantages and disadvantages of leasing.

Problem 3: LONG TERM FUNDING

A. Analyze the impact of leverage on earnings and risk.

B. Describe the characteristics of various debt and equity instruments.

C. Analyze dividend policy and derivatives strategies in relation to maximizing shareholder wealth.

Problem 4: CAPITAL STRUCTURE AND COST OF CAPITAL

A. Calculate an organization's Weighted Average Cost of Capital (WACC).

B. Explain how optimal capital structure is determined using the Capital Asset Pricing Model (CAPM) and Weighted Average Cost of Capital (WACC).

C. Explain the relationship between cost of capital, bond ratings, and the capital budgeting decision-making process.

Problem 5: MERGERS, ACQUISITIONS, AND INTERNATIONAL FINANCE

A. Assess the effects of mergers and acquisitions on the value of a firm.

B. Assess the important issues in international financial management.

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Finance Basics: Financial applications of the time value of money
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