Solving Present Value and Future Value Problems
You are the CFO (Chief Financial Officer) of ABC Golf Equipment Corporation, a small company that sells golf equipment. Mr. Hillbrandt, the new CEO (Chief Executive Officer) has a marketing background and is trying to learn more about the financial side of running a business. He wants your help and asks for an introduction to the concept of time value of money.
The value of a typical corporate bond is the present value of an annuity plus the present value of a lump sum. Thus, if an individual does not understand how to calculate the present value of a lump sum or the present value of an annuity, it is difficult to determine the value of a typical corporate bond. Thus, in this case assignment, you will work through a variety of time value of money problems to illustrate the idea to the CEO.
The following websites include a number of formulae and financial calculators, including Present Value, Future Value, and Annuity:
Financial calculators. (2015). Calculator Soup. Retrieved from http://www.calculatorsoup.com/calculators/financial/
Carther, S. (2015). Calculating the present and future value of annuities. Investopedia. Retrieved from http://www.investopedia.com/articles/03/101503.asp
Required:
Compute and show your work for the following scenarios:
Computations (use Excel).
Memo (use Word).
Interpret the results from the computations and explain how the information is useful. Write a four or five paragraph memo to the CEO. Start with an introduction and end with a conclusion or recommendation. Each of the four or five paragraphs should have a heading.
Short Essay (use Word).
Do research and write a short essay to comment on the use of bonds by public corporations. The emphasis of the essay could be either
Start with an introduction and end with a summary or conclusion. Use headings. Don’t forget to reference your sources. Maximum length of two pages.
Each submission should include two files: (1) An Excel file; and (2) A Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.