What is the difference between present values and future values?
How would you use present and future value techniques in preparing a financial plan for retirement?
How would various required rates of return affect your decision? Explain.
What is a loan amortization schedule?
How would you use it determine your loan interest rate?
What factors would impact your choice between two loans?
What are the three key inputs to the valuation model?
How would you determine the valuation of an asset?
How would the intrinsic value of assets differ from the market value? Explain.
Present value, just as it sounds, is the value at the present time. Future value is the value received in the future. According to Gitman (2006), “Future value techniques typically measure cash flows at the end of a project’s life. Present value techniques measure cash flows at the start of a project’s life (time zero)” (p. 160)
In preparing a financial plan for retirement, one could use present and future value techniques to determine the preferred retirement age. For example, if I planned to retire today, I would know I had X amount of dollars; however, I could use future value to figure out the X amount of dollars I would have in the future if I continued to work longer.
Rates of return would affect the decisi