P4_FInal_Villarreal_Report_4Sept2023

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University of Maryland, Baltimore *

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620

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Finance

Date

Jun 8, 2024

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docx

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8

Uploaded by DoctorJackal2325

1 031422 Project 4 Questions - Report Template Instructions: Answer the five questions below, based on the information that you developed in the Excel workbook. Provide support for your reasoning from the readings in Project 4, Step 1, and the discussion in Project 4, Step 3. Be sure to cite any sources used in proper APA (7th ed.) format. Provide a detailed response below each question. Use 12-point font and double spacing. Maintain the existing margins in this document. Your final Word document, including the questions, should not exceed 5 pages. Include a title page in addition to the five pages. Any tables and graphs you choose to include are excluded from the five-page limit. Name your document as follows: P4_Final_lastname_Report_date. You must address all five questions and make full use of the information in the Excel workbook. You are strongly encouraged to exceed the requirements by refining your analysis. Consider other tools and techniques that were discussed in the required and recommended reading for Project 4.
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3 1. Present-value calculations, rather than future-value calculations, are the key to analysis in the field of corporate finance. Why is this the case? Explain the importance for Largo Global Inc. (LGI) of understanding today's value of projected future revenues and/or costs. By operating with current and future value calculations, investors have the ability to calculate the worth of cash flow in a better way, which is important to the study of business finance. Current value calculations calculate the worth of future investment based on present currency, instead of the future value estimates that consider the effect of compound interest. Buyers would instead buy items immediately, a reason why the value of money is an important notion in finance (Parrino, et al, 2012). The value of the dollar tends to change often and that is something LGI should take into consideration because a business can invest the funds and produce interest. The reason for this is because interest rates are low now but will only increase as time goes. Corporate finance decisions are contingent on applying the time value of money because investment decisions consist of associating the value of current investments to the value of future cash flows. By separating the value of assets that offer various returns, LGI can analyze the current value of expected future income or costs. Present-value estimates indicate the company's real financial situation, LGI is broadly engaged in corporate finance research. Inflation and the discount rate are taken into account in the present-value calculations, producing a current value for all cash flows available. The amount of this analysis is then used to regulate the current value of the investment, instead of the estimates of future value that rely on interest rates only and not inflation. To calculate the value of cash flow in the future, future value evaluations use the combination method. Since it predicts earnings for the future, it is less
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