Module Overview
The real value of a dollar in your hand today is much more than what you will earn after a year. Why is it so? It is the value of time.
Imagine you won a cash prize worth $50,000 and you can choose to receive your payment either now or two years later. Which option would you choose?
Instinctively, you would not want to wait for two years when you can get the same amount now. By receiving the $50,000 now, you will be able to increase its future value (FV) by gaining interest over a period of time if you placed it in an interest-bearing bank account. If you choose to receive the cash prize two years later, the amount will be the same-$50,000.
So how do you calculate how much more the first option is worth as compared to the second option?
In this module, you will learn about the concepts of present value (PV), FV, and compound interest and how you can use these concepts as business valuation tools to make day-to-day investment decisions.
In business, time value of money is one of the most important concepts used to make various financial decisions.
This concept becomes critical for you as a manager, especially, if you contemplate raising capital, expanding operations or product offerings, selling a portion or all of the business, or merging with other organizations.
Understanding time value of money will help you assign value to all aspects of your business operations, and recognize the level of risk and the expected return.
Module Readings:
Complete the following readings early in the module:
Module 3 overview
From your course textbook, Managerial economics: Economic tools for today's decision makers, read the following chapters:
Capital Budgeting and Risk
Assigned Reading:
From the Argosy University online library resources, read:
Lawler, E. E., III, & Toole, E. (Eds.). America at work: Choices and challenges. Gordonsville, VA: Palgrave Macmillan.
McGrath, R. G., & MacMillan, I. C. (2009). How to rethink your business during uncertainty. MIT Sloan Management Review, 50(3), 25-30.
Assignment: Required Assignment 1-Organizational Assessment
Instructions:
As a manager, you have to continually evaluate the organization and its strategy and consistently adapt the business model to ensure that the overall business plan is one step ahead of the competition.
In this assignment, you will get an opportunity to learn, from actual experiences, how an informed manager would assess the current overall health of an organization and make decisions regarding future opportunities and performance.
Tasks:
Select an industry relevant to your career. If you lack work experience, you can base your selection on real-life market situations or business areas that you may have knowledge about. You can also consult sources such as the Wall Street Journal, Financial Times, Bloomberg Markets, the Economist, US News and World Report, and the Argosy University online library resources.
Research the growth opportunities in the industry, competitive strategies that were employed, typical customers, and other relevant information related to the industry.
Specific opportunities will differ depending on the industry selected, but be sure to consider current economic events and news relating to the industry that may influence the future direction of your industry.
Within this industry, select a midrange-performing company that provides goods or services. Then, address the following:
Analyze why this company maintains the level of success it does from an economic and financial perspective. Develop at least two visual aids (e.g., charts, graphs, or tables) to support your argument.
Evaluate whether the company's pricing and positioning decisions contribute to or hinder that success.
Evaluate whether the strategy currently used by your industry, as discussed in previous sections, appears to be sustainable over time.
Create a 4- to 5-page research paper. At the end your paper, include a reference page and cite scholarly sources in APA style.
Your response should be thorough and address all components of the discussion question in detail, include citations of all sources, where needed, according to the APA Style, and demonstrate accurate spelling, grammar, and punctuation.