Week 2 Discussions and Required Resources

Two-part assignment – All parts must be at least 200 words unless otherwise noted. Please read all attachments and follow ALL instructions.

Part 1: Initial Investment
After reading Chapters 3 and 4 of your textbook, address each of the following questions:

Think of      something you want or need for which you currently do not have the funds.      It could be a vehicle, boat, horse, jewelry, property, vacation, college      fund, retirement money, etc. Select something which costs somewhere      between $2,000 and $50,000. Use the “Present Value Formula”, which      computes how much money you need to start with now to achieve the desired monetary      goal. Assume you will find an investment that promises somewhere between      5% and 10% interest on your money (you choose the rate) and pretend you      want to purchase your desired item in 12 years. (Remember that the higher      the return, usually the riskier the investment, so think carefully before      deciding on the interest rate.) How much do you need to invest today to      reach that desired amount 12 years from now?

You wish to      leave an endowment for your heirs that goes into effect 50 years from      today. You don’t want to be forgotten after you pass so you wish to leave      an endowment that will pay for a grand soirée yearly and forever. What      amount would you like spent yearly to fund this grand party? How much      money do you have to leave to your heirs 50 years from now assuming that      will compound at 6% interest? Assuming that you have not invested anything      today, how much would you have to invest yearly to fully fund the annuity      in 50 years, again assuming a 6% monthly compounding rate?

Part 2:   Managing Earnings
Companies often try to keep accounting earnings growing at a relatively steady pace in an effort to avoid large swings in earnings from period to period. They also try to manage earnings targets. Reflect on these practices and discuss the following in your discussion post.

Are these practices ethical?
What are two tactics that a financial manager can use to manage      earnings?
What are the implications for cash flow and shareholder wealth?
Using the financial balance sheet as displayed in the text, provide      an example of how purchasing an asset or issuing stocks or bonds could      potentially impact earnings targets.

Required Resources
Text

Byrd, J., Hickman, K., & McPherson, M. (2013). Managerial finance [Electronic version]. Retrieved from https://content.ashford.edu/

Chapter      3: Time is Money
Chapter      4: Time Value Applications – Security Valuations and Expected Returns
Chapter      6: Capital Budgeting – Investing to Create Value