Topic 1: Monitoring the Cost of Money: Interest Rates
Interest rates, the cost of money, influence most factors related to personal and corporate capital budgeting.
You are the CFO of a company. There is new robotic equipment you want to buy. Your net present value (NPV) study shows that the new equipment will add new free cash flows to the company above the discount rate used in your NPV study. However, you have noticed that the market is indicating that the cost of capital is expected drop in the future.
- Would you, as the CFO, finance your projects as soon as possible if cost of capital was expected to drop? Please explain.
- What are the opportunity costs you must consider in this decision?
- More importantly, where do you find the information to analyze expected changes in interest rates?
Your initial discussion post must include one outside resource which may include the Internet or Library, and must be cited according to current APA formatting.
Topic 2: Time Value of Money, Practical Applications in Business and Personal Decisions
If you have put money into the stock or bond market or into a savings account; made monthly auto or mortgage payments; or paid down your student loan ahead of time, you have inherently applied TVM.
- Discuss how you may have used TVM in a recent investment or loan decision, and explain some of the TVM details that may have been involved in your transaction.
- If you have not used TVM in the past financial transactions, explain potential TVM applications you would encounter in future business or personal transactions.
Your initial discussion post must include one outside resource, which may include the Internet or Library, and must be cited according to current APA formatting.
Please provide at least a 250-word response for each topic.