Time Value of Money/Capital Budgeting
Extra Problems
Spring 2011 - TCA321
All problems assume that cash flows are received at the END of a year.
Time Value of Money
1. What is the PV of $119,000 received 15 years from today at 18% interest?
119,000 * 0.08

Price Elasticity of Demand
PE of D =
Quantity/Base Quantity
Price/Base Price
If PE is >1.0, then demand is Elastic (not desired)
If PE is < 1.0, then demand is Inelastic (desired)
Informal Pricing Approaches
These 4 approaches ignore costs
1. What the com

Basic Cost Concepts
Cost can refer to:
Purchase price of an asset
An expense for the period
A casualty loss (i.e., hurricane damage)
Chapter 6 - costs as expenses
In this context, cost is the reduction of
an asset in order to produce revenue.
Chapte

Forecasting Methods
Forecasting = the calculation or prediction
of future events (ie, sales next month)
Why forecast? Necessary for planning
Inaccurate forecasts can result in:
Poor service to guests
Cost overruns (such as overtime wages)
Performing

WHAT RATIOS EXPRESS
WHAT RATIOS EXPRESS
MATHEMATICAL EXPRESSION - to
compare 2 numbers by dividing them
TYPES
Percentages (Profit margin or occupancy percentage)
Per unit basis (Average daily rate)
Turnover (Seat turnover in restaurants)
Coverage (Current

Time Value of Money
Also known as using compound interest
Included with Ch13 (on Capital Budgeting)
Time value of money
Pages 605-614
Ex 1, 2, 5 & 7
In this course (HFT-3431), we will use the
Tables in class (book), and on Exam #3
(as a handout)
Tim

Capital Budgeting Chapter 13
Capital Expenses Vs. Revenue Expenses
What is capital budgeting?
Time value of money
Capital budgeting models
Payback period
NPV (net present value)
IRR (internal rate of return)
Capital Budgeting
CB = The process of d

Chapter 10 - Budgets
Planning = The process of determining:
Where you are
Where you want to be
How to get there
for a business organization
Budget = A formal financial plan covering a
defined period of time
Types of Budgets
Operations budget
Revenu

HFT 3431
Exam 1 Review (Chapters 5 & 6 only)
(Not a comprehensive list)
Chapter 5
Ratio standards
Purpose of ratio analysis
Classes of ratios
o Liquidity
Current
Quick
Working capital
o Solvency
Leverage
Solvency
Debt-Equity
No. of times interes

Managerial Accounting
Exam 3 Review (Chapter 13 only)
Chapter 13
Capital expenditures and Revenue expenditures.
Relationship of capital budgeting to operations budgeting and types of capital
budgeting decisions.
Time value of money.
Equations for FV &

Menu Item
Name
1
2
3
4
5
6
7
Sirloin Steak
King Crab
Lobster
Prime Rib
White Fish
New York Strip
Chicken ala King
TOTAL
No. Menu Item Item
Item
Sold Mix % Food Selling CM
Cost Price
240
50
60
300
80
180
280
20.17%
4.20%
5.04%
25.21%
6.72%
15.13%
23.53%
3.

(Not a comprehensive list)
Managerial Accounting
Exam 2 Review (Chapters 7, 8 only)
Chapter 7
CVP analysis which department can use this? Service or profit or both?
Assumptions for CVP
CVP equation for breakeven & profits (pg. 329)
Definition / Meanin

Managerial Accounting
Exam 4 Review (Chapter 9 & 10)
*(Not
a comprehensive list)
Chapter 9
Nature and limitations of forecasting
Patterns emerging from historical data:
Trend, seasonal, cyclical
Also random variations
Various forecasting methods
Quantitat

Liquidity Ratios Current Ratio = Current Assets / Current Liabilities. Liquidity ratios Quick Ratio =
Quick Assets / Current Liabilities. Liquidity ratio =Account Receivable Turnover= AR Revenue /
Average Account Receivable. Solvency RatioDebt to Asset Ra