When the Genesis Energy
and Sensible Essential teams held their weekly meeting, the time value of money
and its applicability yielded an extremely stimulating discussion. However,
most of the team members from Genesis Energy were very perplexed. Sensible Essentials
decided the most expedient way to demonstrate how interest rates as well as
time impact the value of money was to use examples. You have been asked to
prepare a report analyzing your findings of the three example calculations
listed below.
In this assignment, you
will do the following:
1.
Calculate the future
value of $100,000 ten years from now based on the following annual interest
rates:
a.
2%
b.
5%
c.
8%
d.
10%
2.
Calculate the present
value of a stream of cash flows based on a discount rate of 8%. Annual cash
flow is as follows:
a.
Year 1 = $100,000
b.
Year 2 = $150,000
c.
Year 3 = $200,000
d.
Year 4 = $200,000
e.
Year 5 = $150,000
f.
Years 6-10 = $100,000
3.
Calculate the present
value of the cash flow stream in problem 2 with the following interest rates:
a.
Year 1 = 8%
b.
Year 2 = 6%
c.
Year 3 = 10%
d.
Year 4 = 4%
e.
Year 5 = 6%
f.
Years 6-10 = 4
Perform your
calculations in an Excel spreadsheet. Copy the calculations in a Word document.
In addition, write a 2 page executive summary in Word
format.
