Tasks:
Part 1: You are the chief financial officer of a firm. The firm has an expected liability (cash outflow) of $2 million in ten years at a discount rate of 5%.
- Calculate the amount the firm would need on the present date as savings to cover the expected liability.
- Calculate the amount the firm would need to set aside at the end of each year for the next ten years to cover the expected liability.
Part 2: Using the online library resources, identify an article that demonstrates the application of time value of money principles to a business decision.
- Explain the specific business decision that management made after computing this value. Analyze how management used the concept of the time value of money principles to make this decision.
- Analyze factors other than the time value of money that management considered or should have considered in reaching the business decision.
