Time Value of Money

Finance for Marketing Decisions

Time Estimate of Money Exercises

1. Which of the aftercited investments would entertain the chief forthcoming estimate at the end of 10 years? Which has the chief bestow estimate today? Rank the choices under from chief to lowest bestow estimate. Wear that the potent annual profit blame for all investments is the corresponding and is superior than cipher.

a. Investment A pays $250,000 at the opening of whole year for the bestow 10 years (a completion of 10 acquittals).

b. Investment B pays $125,000 at the end of whole 6-month time for the bestow 10 years (a completion of 20 acquittals).

c. Investment C pays $125,000 at the opening of whole 6-month time for the bestow 10 years (a completion of 20 acquittals).

d. Investment D pays $2.5 favorite at the end of 10 years (lawful one acquittal).

e. Investment E pays $250,000 at the end of whole year for the bestow 10 years (a completion of 10 acquittals).

2. Fond the fair exits of coin courses shown in the aftercited consultation, retort deal-outs A and B:

Cash Course Stream

End of Year A B

1 $50,000 $10,000

2 40,000 20,000

3 30,000 30,000

4 20,000 40,000

5 10,000 50,000

Total $150,000 $150,000

A. Find the bestow estimate of each succession of coin courses, using a 12% abatement blame.

B. Discuss how, and why, the two contrariant bestow estimates are contrariant fond that the sum completion of each succession of coin course is the corresponding.

3. Calculate the bestow estimate of the aftercited fair exit of coin courses. Wear an 8 percent abatement blame.

End of Year Coin Flow

1 $10,000

2 10,000

3 10,000

4 12,000

5 12,000

6 12,000

7 12,000

8 15,000

9 15,000

10 15,000

4. Wear that you lawful won the set-forth lottery. Your booty can be smitten either in the devise of $40,000 at the end of each of the bestow 25 years or as a one acquittal of $500,000 paid after a whileout-delay.

A. If you await to be conducive to gain 5 percent year-by-year on your investments balance the bestow 25 years (i.e. 5 percent is the alienate abatement blame), by taxes and other considerations, which resource should you captivate? Wear that your simply sentence criteria is pickeding the liberty after a while the chief bestow estimate.

B. Would your sentence in deal-out (a) be altered if you could gain 7 percent rather than 5 percent on your investments balance the bestow 25 years?

5. You’re in your ultimate semester at NYU. You’ve lawful common two job offers.

Offer 1

YouTube Marketing Analyst

San Bruno, CA

Signing bonus: $10,000 (common upfront)

Starting Salary: $100,000

Expected Salary Growth per Year: 10%

Offer 2

Social Media Manager, Glossier

New York, NY

Signing bonus: $20,000 (common upfront)

Starting Salary: $85,000

Expected Salary Growth per Year: 20%

Interest Rates on Spanish legislation bonds

2 yr - 2%

3 yr - 3%

5 yr - 4%

10 yr - 6%

30 yr - 9%

Interest Rates on U.S. legislation bonds

2 yr - 3%

3 yr - 4%

5 yr - 5%

10 yr - 7%

30 yr - 10%

Assume all coin courses appear at the end of the year.

A. Assuming your profit in the two jobs, and the absorbs associated after a while each of them (melting absorbs, subsistence absorbs, taxes etc.), are segregateicular, which job should you cull-out? Wear that your sentence allure be to cull-out the job after a while the upper NPV of indemnification. You intention on substance in whichever job you cull for 5 years.

B. What is the bestow estimate of your indemnification for each of these jobs through year 3?

C. Would your sentence transmute if you intention on quitting and going tail to graduate train in 2 years?

D. What likely notification would constitute you derangement your sentence in deal-out A?

6. Wear TikTok has of-late filed to go exoteric in the United States. They’ve filed their S-1, a muniment that includes all of their unadorned financial notification, after a while the Securities & Extransmute Commission for prospective investors to dissect. Wear all coin courses appear at the end of the year.

Assume that the S-1 shows TikTok’s coin courses to be the aftercited:

2017 - ($430,000,000)

2018 - ($890,000,000)

2019 - ($1,600,000,000)

2020 - ($1,800,000,000)

You’ve proposed that TikTok’s coin courses through the year 2024 to be the aftercited:

2021 - ($1,400,000,000)

2022 - ($1,000,000,000)

2023 - ($500,000,000)

2024 - $0

2025 - $750,000,000

You’ve as-well proposed that the estimate in 2025 of TikTok’s forthcoming coin courses more that end to be $10 billion. You’ve as-well estimated TikTok’s absorb of excellent (aka abatement blame) to be 12%. Wear all coin courses appear at the end of the year.

Assuming TikTok goes exoteric at the end of 2020, what should the estimate of the troop be?

7. You are a gregarious media marketing analyst for Zara. Your supervisor asks you two dissect two contrariant influencer-marketing programs for a new engagement that allure run throughout Europe.

Option 1

Hire a abundant collection of micro-influencers (<10k satellites) to aid your new direction on instagram. You allure pay your micro-influencers an medium of €1000 each in a fond year. You await each micro influencers to geneblame €2,000 in coin course from sales. The enumerate of micro-influencers in your program allure be as follows:

· Year 1 - 120 micro influencers

· Year 2 - Increase to 175 micro influencers completion

· Year 3 - Increase to 275 micro influencers completion

Option 2

Hire a picked collection of mega influencers (>100k satellites) to aid the new direction on instagram. You allure pay each mega-influencers an medium of €7,500 each in a fond year. You await each mega-influencer to geneblame €20,000 in coin course from sales. The enumerate of mega-influencers in your program is as follows:

· Year 1 - 10 mega-influencers

· Year 2 - Increase to 15 mega influencers completion

· Year 3 - Increase to 25 mega influencers completion

For twain libertys, wear all coin courses appear at the end of the year

Interest Rates on Spanish legislation bonds

3 yr - 3%

5 yr - 4%

10 yr - 6%

30 yr - 9%

Interest Rates on U.S. legislation bonds

3 yr - 4%

5 yr - 5%

10 yr - 7%

30 yr - 10%

Which liberty allure you advise to your supervisor? Why? What are three particular pieces of notification that would constitute you transmute your sentence?

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