Corporate Finance: Time Value of Money

1)Please be kind to read below my personal requirement for the essay :
- This essay must be NO less than 2475 words, the assignment itself ( WIthout Reference List ) must be no less than 2200 words.
-Please write the essay in a very simple and direct way , so when I will receive it I can understand its content , and if needed I can do some edit. If the assignment is too technical or complex, I cannot understand it and I cannot edit it, as I am not an expert in the field.
-Please make the assignment also argumentative , do not just write symbols or calculation, but please explain with words and try to argument end to explain the calculations that have been done, so I can also understand what are these calculations for and their meaning.
-Please do not use High Technical language otherwise that can make someone suspicious, but please use simple language to describe the topics.
-Please provide my assessment in WORD document and NOT IN PDF.
-Please use reliable references which I can put into the essay and for which I will not be marked down. You can use also a company website, or a reliable and famous financial website as reference, that will make my life easier when I ll need to edit it. ( If you'll put academic references from book, and you do not write then in the way my College wants , then I ll have to edit it, but it will be hard to edit it as I ll probably will not have all information to reference the way they want), so please use company website or financial official website, so I can easily access to them and check them.
-Pease write the assignment in the following structure and in the following order : 1) Introduction 2)Body 3) Conclusion 4) References List
- Please be aware that my university portal uses Turnitin for detecting plagiarism so please be very careful when writing things which comes from other sources , as Turnitin will immediately detect them and if it will find some similarity they will make me fail the assignment immediately. That's why I would like the assignment to be quite personal and argumentative.
- Please always use third person for the assignment and never write in the first person
2 ) Now that you have my personal requirements for the assignment , I will write below the assessment question :
Time value of money is an important and widely used finance concept. As an individual you are interested in using the time value of money techniques to compare your investment options. You are contemplating whether to invest in shares, bonds, preferred equity, real estate, etc. You have also heard from the Chief Financial Officer (CFO) of your company, that he uses the time value of money techniques to make accept/reject decisions for the company’s projects. The purpose of this activity is to apply the time value of money techniques to evaluate personal as well as organisation investment options as given below. This activity assesses your understanding and application of the material you have learnt in Topics 1, 2, 4 and 5.
Personal investment decisions:
As part of your personal finance, you are planning to buy a house. You have saved $10,000 toward a down payment on a home. The money is invested in an account earning 7% interest. You will be ready to purchase the new home once your savings account grows to $25,000. Approximately how many years will it take for the account to reach $25,000?
You and your spouse are also both planning for retirement. Your spouse plans to invest $1,000 per month into the defined contribution superannuation plan beginning next month. You intend to invest $2,000 per month into your super plan, but your plan is not to begin investing until 10 years after your spouse begins investing. Suppose both of you have just reached the age of 40 and are planning to retire at age 67, and your super plans average a 12% annual return. Who will have more superannuation funds available at retirement?
To supplement your planned retirement, you estimate that you need to accumulate $220,000 in 32 years. You plan to make equal annual end-of-year deposits into an account paying 8% annual interest.
a. How large must the annual deposits be to create the $220,000 fund in 32 years?
b. If you can afford to deposit only $600 per year into the account, how much will you have accumulated by the end of the thirty-second year?
Evaluate your financial plan above and make recommendations.
-Firm’s investment decisions :
Suppose you are working as an external capital budgeting advisor to a highly successful manufacturing firm. You have recently received a proposal for equipment replacement that will presumably lead to more capacity and less cost. The replacement details are given below.
If the new equipment replaces the old equipment, an additional investment of $80,000 in net working capital will be required. The tax rate is 30% and the required rate of return is 10%.
As you work through the NPV and IRR analysis provided by the company, you discover the following errors:
The initial outlay correctly accounts for incremental investment in new fixed capital and net working capital, but after-tax cash proceeds from the sale of old fixed capital are not adjusted.
Annual operating cash flows are not adjusted for tax and depreciation is not added back.
Terminal-year after-tax non-operating cash flows do not recapture investment in net working capital. Also, incremental capital gains on salvage value are not taxed.
You realise that you need to do the entire project feasibility report from scratch. You believe using a spreadsheet will be very helpful for this exercise. Prepare a spreadsheet financial analysis of the proposed project.
Find out the NPV, IRR and profitability index for the replacement proposal. Conduct a sensitivity analysis of NPV to the required rate of return fallin between the range of 10% to 16% pa (with increments of 1%) for the replacement proposal.
Begin the report by briefly explaining your suggested capital budgeting methods and justifying your chosen method. Explain why these criteria are considered superior to the accounting rate of return and payback period used by some firms.
Evaluate the different capital budgeting practices used by developed countries and less developed countries. For this part, you should read the article:
Szucsne Markovics, K 2016, ‘Capital budgeting methods used in some European countries and in the United States’, Universal Journal of Management, vol. 4, no. 6, pp. 348–360.
The article comments on the different capital budgeting methods, both discounted and non-discounted, used by finance managers in Europe and the United States. The article found that the most popular capital budgeting methods used by American companies are net present value and internal rate of return, whereas European companies generally use simple payback period for evaluating their project.
Summarise your findings and present your recommendations.