Question:
The time value of money concept is useful in decision making in finance, marketing, human resources, operations, and information technology. It is also useful in four tasks of management that are planning, organizing, leading coordinating, and control. Let's look at the planning task of the management. In the planning task managers set or choose clear goals and objectives, and formulate strategies to achieve those goals. For example the company's current sales are $1 million dollars, and they have set a 5% growth in sales for each of the next five years, and the current cost is $800,000, and the project cost will increase in equal amounts for next five years, and the cost at the end of the five years will be $1,122,042. If the management has the understanding of time value of money they will be able to set the correct goals.
Explain how would you use the time value of money concept to make a decision on what growth in sales goal would you set for this company so that the company maintains the same operating margin for the next five years.