Module 3 Case Assignment 1.docx - Gavin Rampertaap MPSM 700 \u2013 Sports Business Finance Module 3 Case Assignment 1 6 June 2020 Developing Financial

Module 3 Case Assignment 1.docx - Gavin Rampertaap MPSM 700...

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Gavin Rampertaap MPSM 700 – Sports Business & Finance Module 3 Case Assignment 1 6 June 2020 Developing Financial Insights: Using a Future Value and Present Value Approach 1) You just turned 35 and have been saving for an around-the-world vacation. You want to take the trip to celebrate your 40th birthday. You have set aside, as of today, \$15,000 for such a trip. You expect the trip will cost \$25,000. The financial instruments you have invested the \$15,000 in have been earning, on average, about 8%. (You may ignore income taxes.) a) Will you have enough money in that vacation account on your 40th birthday to take the trip? What will be the surplus, or shortfall, in that account when you turn 40? (Hint: Exhibit 1 will be useful in answering this question.) \$15,000 x 1.4693 = \$22,039.50 \$25,000 - \$22,039.50 = \$2,960.50 No, you would not have enough to cover the trip. You would be short by \$2,960.50 b) If you had to, you could further fund the trip by making, starting today, five annual \$500 contributions to the account. If you adhered to such a plan, how much will be in the account on your 40th birthday? (Hint: Exhibit 3 and the answer to part (a) above will both be useful in answering this question.) \$500 x 6.336 = \$3,168 \$22,039.50 + \$3,168 = \$25,207.50 If I did this, on my 40 th I would have \$25,207.50, which would be enough to cover my trip.
2) Your company has been offered a contract for the development and delivery of a solar- powered military troop transport vehicle. The request for proposal provides all the necessary technical specifications and it also stipulates that two working, economically feasible prototypes must be delivered in four years, at which time you will receive your only customer payment—a single and final payment of \$50 million. Assume a

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