The projected amount and timing of cash flows received from an investment impacts the value of that investment

The projected amount and timing of cash flows received from an investment impacts the value of that investment. The longer it takes to receive a payment, the less valuable it is to the investor today. The key to comparing different investments is to determine the value of each investment in today’s terms. Every investment can be valued in today’s terms using time value of money mathematics. For this discussion forum, you will practice calculating the value of cash flows using the principles of time value of money mathematics.

Time value of money concepts and math form the cornerstone of finance. This discussion is an opportunity for you to practice using these formulas and to progress in your understanding of this important topic. You will use these concepts later in this course, in other finance courses, and throughout a career in finance. Like many concepts, each time you work with time value of money problems you may develop a slightly different, deeper, and more thorough understanding of the theory. Some of you may be quite comfortable using these formulas, while others may need to spend extra time focusing on the mathematics. However, all of you can progress in your abilities through this discussion activity.

Calculate:

Calculate a time value of money problem, according to first letter of your last name, and the equation provided for each problem. The equations listed are in the textbook

J through K

Compute the future value of annual payments of $100, paid for 5 years, with an interest rate of 8% (compounded).

Equation 4.17:

FVn=CF1×(1+r)N−1+CF2×(1+r)N−2+…CFn

Write:

Write out each step you used to solve the problem you were assigned, and provide the solution to the problem as well.
- Present your final solution as a decimal approximation carried out to the second decimal point (e.g., $000.00).
Explain the meaning of the problem and your solution in your own words.
Explain your answers to the following questions:
- If the rate in the problem was higher, would the solution be higher or lower?
- If the time period in the problem was shorter, would the solution be higher or lower?
Describe an element of this problem that was challenging to you.
Ask at least one question about time value of money mathematics.

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