Purpose of this project: to understand the concept of the Time Value of Money (TVM), the relationship between the present value and the future value and learn to compare cash flows at different points in time.
The ideas of present and future value formulas, are the quantitative methods to “equalize” the time differential. Generally, these TVM concepts entails a number of separate applications:
- Present value of a lump-sum amount
- Future value of a lump-sum amount
- Present value of an annuity (ordinary and due)
- Future value of an annuity (ordinary and due)
- Determination of the amount of equal payment (e.g. loan payment) on an annuity when the present value (e.g. principal of a loan) is known
- Determination of the amount of equal amount on an annuity when the future value is known
- Determination of the number of periods
- Determination of the interest rate/rate of return/discount rate
and the present value of perpetuity and present value and future value of uneven cash flows.
First, conduct a brief research on how to become a millionaire by applying the concepts of the time value of money and the power of compounding ( write a 200-word essay for Question #1)
Then answer the remaining eight questions applying the Time Value of Money concepts to each independent situation (show your work and justify your answer