After reading Chapters 3 and 4 of your textbook, address each of the following questions:
a) Think of something you want or need for which you currently do not have the funds. It could be a vehicle, boat, horse, jewelry, property, vacation, college fund, retirement money, etc. Select something which costs somewhere between $2,000 and $50,000. Use the “Present Value Formula”, which computes how much money you need to start with now to achieve the desired monetary goal. Assume you will find an investment that promises somewhere between 5% and 10% interest on your money (you choose the rate) and pretend you want to purchase your desired item in 12 years. (Remember that the higher the return, usually the riskier the investment, so think carefully before deciding on the interest rate.) How much do you need to invest
today to reach that desired amount 12 years from now?
b) You wish to leave an endowment for your heirs that goes into effect 50 years from
today. You don’t want to be forgotten after you pass so you wish to leave an endowment that will pay for a grand soirée yearly and forever. What amount would you like spent yearly to fund this grand party? How much money do you have to leave to your heirs 50 years from now assuming that will compound at 6% interest? Assuming that you have not invested anything
today, how much would you have to invest yearly to fully fund the annuity in 50 years, again assuming a 6% monthly compounding rate?
Guided Response: Review several of your classmates’ postings. Examine calculations and reply to at least two of your classmates’ posts by adding recommendations to extend their thinking or posing questions to help them consider components they may have missed.
DQ 2 Managing Earnings
Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets. Reflect on these practices and discuss the following in your discussion post.
Are these practices ethical?
What are two tactics that a financial manager can use to manage earnings?
What are the implications for cash flow and shareholder wealth?
Using the financial balance sheet as displayed in the text, provide an example of how purchasing an asset or issuing stocks or bonds could potentially impact earnings targets.
Your post should be 200-250 words in length.
Guided Response: Review your classmates’ posts. Respond to at least two of your classmates’ postings by sharing an example that supports their position or encourages them to expand or change their thinking.
Assignment Due Sunday, 12th July
To complete the following assignment, go to this week’s Assignment link in the left navigation.
Return on Investment – Education Funding
Develop a three- to five-page analysis (excluding the title and reference pages) on the projected return on investment for your college education and projected future employment. This analysis will consist of two parts.
Part 1: Describe how and why you made the decision to pursue an MBA. In the description, include calculations of expenses and opportunity costs related to that decision.
Part 2: Analyze your desired occupation. Determine how much compensation (return) you expect to earn and how long will it take to pay back the return on this investment. Use the financial formulas, Net Present Value (NPV), Internal Rate of Return (IRR), and Payback, provided in Chapters 3 and 4 of your text.
The analysis should be comprehensive and reference specific examples from a minimum of two scholarly sources, in addition to your text. The paper must be formatted according to APA.