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Week 5

by: Tiarra Jensen

Week 5 FIL 240

Tiarra Jensen
GPA 3.9
Business Finance

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About this Document

This goes along with his notes, it simply highlights the key items that we discussed.
Business Finance
Class Notes
25 ?




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This 6 page Class Notes was uploaded by Tiarra Jensen on Saturday September 19, 2015. The Class Notes belongs to FIL 240 at Illinois State University taught by Trefzger in Fall 2015. Since its upload, it has received 106 views. For similar materials see Business Finance in Finance at Illinois State University.


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Date Created: 09/19/15
Fil 240 Business Finance Teacher Joseph Trefzger Note taker Tiarra Jensen tiiens1ilstuedu Week 5 Anything emphasized during class discussion will have a next to it gt This bullet mark will signify any mathematical equations List of what chapters to read topics and homework can be found at his website httpswww5cobilstueduiwtrefzfil240 A calculator is needed for his class but it cannot be a graphing calculator Dav 9 September 15 2015 Topic 4 Next Tuesday or Wednesday Night he is going to try and have a review session available We went over some more homework problems The problems and answers are on his website When you see ROE or ROA think DuPont formula Remember to work all problems and equations with a story to remember it Problem number 25 he said will be too long to have as a test question but small parts of it may be on the test Just not the whole thing for one problem Some Side Notes 0 If current ratio is high and quick ratio is low compared to industry average then there must be a lot of inventory 0 If there is no inventory then current and quick ratios would equal each other M This is aside from the homeworkclass work These are his Tips for a resume Don t say Excellent say Interested If you say excellent then they have high expectations which can result in failure however if you say interested then they know you re good at it and like doing that job In the Skills part of the resume Don t say Greeted customers warmly If it s a customer service job then they already know you did that Say things such as learned to work in a team environment or Learned the importance of customer service I took a picture of the bottom half of his tips page Which is posted below r v a H I i quot ea ng less things Obviousfm Pinealclotheszon hmagers h eeterlrvousteme 39 quot lavemmmeh g Learned to work in a team environmerit vquot Leamcrl importance ofcustmner SGI VIUC v Advanced i39mm oor sweeper to inventory manager ever live years ol smmmer wm k Jobs like lilbgtenrlr gymmlstics instructor camp counsclorfhousc L3ISHEETbabysitter Stress issues of responsibility d trust Topic 4 Time Value of money A typical use in personal money management is planning and saving for retirement A typical use in business financial management is the capital budgeting decision determining whether it is appropriate to spend a large amount of money to buy new long lived equipment What textbooks call Future Value of 1 1r won t be on Exam 1 1 What textbooks call Present Value of 1 1 r n or equivalently 1 r 0 R rate of return or growth that occurs each time period 0 N number of those periods I UNDERSTANDING REQUIRED RATES OF RETURN r or g or i or k 0 More risk perceived higher rate of return basically if you are going to risk more then you want to get more back 0 Real risk rate of return r r P DRP LP MRP FP TimeValue money problems Either you have a series of payments or you don t If there are a series of payments then it s an annuity problem if you don t have a series of payments then it s a nonannuity problem Single Dollar amount Putin 100 and don t touch it for 3 years Nonannuity Timeline Year 1 2 3 Deposit 10000 000 000 Interest 6 100066 10606636 1123606674 Total at end of year 10600 11236 11910 If it s a large number of years that you re looking at for instance 70 years then use this equation instead BAMT 1 r EAMT 100106 70 EAMT 1001 06 70 EAMT 1005907593018 EAMT 590759 EAMT Example of a not so obvious annuity is buying a painting since it increases in value over time If you want to know how much money you need to deposit to get a certain amount of money under an interest rate then use this equeation BAMT EAMT 1 r BAMT 11910 1063 10000 or in the multiplicative form more traditionally used 1 3 BAMT 11910 106 10000 You can find the rate you want as well by going off of the same equation BAMT 1 r EAMT 100 1 r3 11910 1 r3ll9l W1 3 31191 g 1191 3 lr 106 R 06 g 6 If payments are not equal each year then pay attention to this 101Yr 1 1231Yr 1101Yr 2 1231Yr 2101Yr 3 1231Yr 3101Yr 4 1231Yr 4 Plan Starts Deposit 2000 Deposit 2100 Deposit 2800 Deposit 3200 With 0 Plan Ends If we can earn a 10 average annual interest rate on the account39s growing balance the total we will have by the end of year 4 can be computed with four applications of our BAMT 1 r EAMT equation 2000 x 1103 2000 x 1331000 266200 as EAMT deposit 1 will reach by end of year 4 2100 x 1102 2100 x 1210000 254100 as EAMT deposit 2 will reach by end of year 4 2800 x 1101 2800 x 1100000 308000 as EAMT deposit 3 will reach by end of year 4 3200 x 1100 3200 x 1000000 320000 as EAMT deposit 4 will reach by end of year 4 Review Times for test next Thursday Review Office times Friday 1 to 5 and Monday 1 to 5 Tuesday and Wednesday for discussion review at 730 both nights


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