The opportunity cost , the concept of opportunity cost used in TVM analysis and where it is shown on time line. Introduction: Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost. Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 5, Problem 1Q

Summary Introduction

To explain: The opportunity cost, the concept of opportunity cost used in TVM analysis and where it is shown on time line.

Introduction:

Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost.

Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Expert Solution & Answer

Answer to Problem 1Q

The opportunity cost refers to that cost which is left out to choose an alternative of the similar type and risk. If the risks associated with two options are the same and the individual has to choose one, the cost associated with that thing which is left is the opportunity cost.
That is why opportunity cost is also called as the alternative cost.
The opportunity cost plays an important role in the decisions of the user and in many other management decisions.
The time value of money analysis is used by the investors. With the help of opportunity cost used in the time value of money analysis, the investors can choose the lenders which will give the best rate of return. When that option is chosen which gives the best rate of return, the future value of money is increased.
The opportunity cost is shown for every cash inflows and cash outflows on a time line.
In all the given situations, the interest rate is utilized as the single number.

Explanation of Solution

The opportunity cost is a very important factor in making financial and management decisions.
The time value of money analysis is done with the help of opportunity costs, by which the investors are able to make better decisions that helps them in earning more value of money in future.
The time line is the visual representation of the time value of money analysis. The time line represents the time periods and the value of cash flows for that period with the interest rate.
The single number which is used is the rate of interest, as the rate of interest is an important factor in this analysis.

Conclusion

Thus, the opportunity cost is the alternative cost, it is an important factor in time value of money analysis, and the interest rate is the single number used.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Compute Ke and Kn under the following circumstances: a. D1= $5, P0=$70, g=8%, F=$7 b. D1=$0.22, P0=$28, g=7%, F=2.50 c. E1 (earnings at the end of period one) = $7, payout ratio equals 40 percent, P0= $30, g=6%, F=$2,20. Note: D1 is the earnings times the payout rate. d. D0 (dividend at the beginning of the first period) = $6, growth rate for dividends and earnings (g)=7%, P0=$60, F=$3. You will need to calculate D1 (the dividend after the first period).

Terrier Company is in a 45 percent tax bracket and has a bond outstanding that yields 11 percent to maturity. a. What is Terrier's after-tax cost of debt? b. Assume that the yield on the bond goes down by 1 percentage point, and due to tax reform, the corporate tax falls to 30 percent. What is Terrier's new aftertax cost of debt? c. Has the after-tax cost of debt gone up or down from part a to part b? Explain why.

The Squeaks Cat Rescue, which is tax-exempt, issued debt last year at 9 percent to help finance a new animal shelter in Rocklin. a. If the rescue borrowed money this year, what would the after-tax cost of debt be, based on its cost last year and the 25 percent increase? b. If the receipts of the rescue were found to be taxable by the IRS (at a rate of 25 percent because of involvement in political activities), what would the after-tax cost of debt be?

Answer 2

Question

Chapter 5, Problem 1Q

Summary Introduction

To explain: The opportunity cost, the concept of opportunity cost used in TVM analysis and where it is shown on time line.

Introduction:

Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost.

Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Expert Solution & Answer

Answer to Problem 1Q

The opportunity cost refers to that cost which is left out to choose an alternative of the similar type and risk. If the risks associated with two options are the same and the individual has to choose one, the cost associated with that thing which is left is the opportunity cost.
That is why opportunity cost is also called as the alternative cost.
The opportunity cost plays an important role in the decisions of the user and in many other management decisions.
The time value of money analysis is used by the investors. With the help of opportunity cost used in the time value of money analysis, the investors can choose the lenders which will give the best rate of return. When that option is chosen which gives the best rate of return, the future value of money is increased.
The opportunity cost is shown for every cash inflows and cash outflows on a time line.
In all the given situations, the interest rate is utilized as the single number.

Explanation of Solution

The opportunity cost is a very important factor in making financial and management decisions.
The time value of money analysis is done with the help of opportunity costs, by which the investors are able to make better decisions that helps them in earning more value of money in future.
The time line is the visual representation of the time value of money analysis. The time line represents the time periods and the value of cash flows for that period with the interest rate.
The single number which is used is the rate of interest, as the rate of interest is an important factor in this analysis.

Conclusion

Thus, the opportunity cost is the alternative cost, it is an important factor in time value of money analysis, and the interest rate is the single number used.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 5, Problem 1Q

Summary Introduction

To explain: The opportunity cost, the concept of opportunity cost used in TVM analysis and where it is shown on time line.

Introduction:

Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost.

Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Expert Solution & Answer

Answer to Problem 1Q

The opportunity cost refers to that cost which is left out to choose an alternative of the similar type and risk. If the risks associated with two options are the same and the individual has to choose one, the cost associated with that thing which is left is the opportunity cost.
That is why opportunity cost is also called as the alternative cost.
The opportunity cost plays an important role in the decisions of the user and in many other management decisions.
The time value of money analysis is used by the investors. With the help of opportunity cost used in the time value of money analysis, the investors can choose the lenders which will give the best rate of return. When that option is chosen which gives the best rate of return, the future value of money is increased.
The opportunity cost is shown for every cash inflows and cash outflows on a time line.
In all the given situations, the interest rate is utilized as the single number.

Explanation of Solution

The opportunity cost is a very important factor in making financial and management decisions.
The time value of money analysis is done with the help of opportunity costs, by which the investors are able to make better decisions that helps them in earning more value of money in future.
The time line is the visual representation of the time value of money analysis. The time line represents the time periods and the value of cash flows for that period with the interest rate.
The single number which is used is the rate of interest, as the rate of interest is an important factor in this analysis.

Conclusion

Thus, the opportunity cost is the alternative cost, it is an important factor in time value of money analysis, and the interest rate is the single number used.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 5, Problem 1Q

Summary Introduction

To explain: The opportunity cost, the concept of opportunity cost used in TVM analysis and where it is shown on time line.

Introduction:

Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost.

Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Expert Solution & Answer

Answer to Problem 1Q

The opportunity cost refers to that cost which is left out to choose an alternative of the similar type and risk. If the risks associated with two options are the same and the individual has to choose one, the cost associated with that thing which is left is the opportunity cost.
That is why opportunity cost is also called as the alternative cost.
The opportunity cost plays an important role in the decisions of the user and in many other management decisions.
The time value of money analysis is used by the investors. With the help of opportunity cost used in the time value of money analysis, the investors can choose the lenders which will give the best rate of return. When that option is chosen which gives the best rate of return, the future value of money is increased.
The opportunity cost is shown for every cash inflows and cash outflows on a time line.
In all the given situations, the interest rate is utilized as the single number.

Explanation of Solution

The opportunity cost is a very important factor in making financial and management decisions.
The time value of money analysis is done with the help of opportunity costs, by which the investors are able to make better decisions that helps them in earning more value of money in future.
The time line is the visual representation of the time value of money analysis. The time line represents the time periods and the value of cash flows for that period with the interest rate.
The single number which is used is the rate of interest, as the rate of interest is an important factor in this analysis.

Conclusion

Thus, the opportunity cost is the alternative cost, it is an important factor in time value of money analysis, and the interest rate is the single number used.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 5, Problem 1Q

Summary Introduction

To explain: The opportunity cost, the concept of opportunity cost used in TVM analysis and where it is shown on time line.

Introduction:

Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost.

Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Expert Solution & Answer

Answer to Problem 1Q

The opportunity cost refers to that cost which is left out to choose an alternative of the similar type and risk. If the risks associated with two options are the same and the individual has to choose one, the cost associated with that thing which is left is the opportunity cost.
That is why opportunity cost is also called as the alternative cost.
The opportunity cost plays an important role in the decisions of the user and in many other management decisions.
The time value of money analysis is used by the investors. With the help of opportunity cost used in the time value of money analysis, the investors can choose the lenders which will give the best rate of return. When that option is chosen which gives the best rate of return, the future value of money is increased.
The opportunity cost is shown for every cash inflows and cash outflows on a time line.
In all the given situations, the interest rate is utilized as the single number.

Explanation of Solution

The opportunity cost is a very important factor in making financial and management decisions.
The time value of money analysis is done with the help of opportunity costs, by which the investors are able to make better decisions that helps them in earning more value of money in future.
The time line is the visual representation of the time value of money analysis. The time line represents the time periods and the value of cash flows for that period with the interest rate.
The single number which is used is the rate of interest, as the rate of interest is an important factor in this analysis.

Conclusion

Thus, the opportunity cost is the alternative cost, it is an important factor in time value of money analysis, and the interest rate is the single number used.

Answer 6

Chapter 5, Problem 1Q

Summary Introduction

To explain: The opportunity cost, the concept of opportunity cost used in TVM analysis and where it is shown on time line.

Introduction:

Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost.

Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Expert Solution & Answer

Answer to Problem 1Q

The opportunity cost refers to that cost which is left out to choose an alternative of the similar type and risk. If the risks associated with two options are the same and the individual has to choose one, the cost associated with that thing which is left is the opportunity cost.
That is why opportunity cost is also called as the alternative cost.
The opportunity cost plays an important role in the decisions of the user and in many other management decisions.
The time value of money analysis is used by the investors. With the help of opportunity cost used in the time value of money analysis, the investors can choose the lenders which will give the best rate of return. When that option is chosen which gives the best rate of return, the future value of money is increased.
The opportunity cost is shown for every cash inflows and cash outflows on a time line.
In all the given situations, the interest rate is utilized as the single number.

Explanation of Solution

The opportunity cost is a very important factor in making financial and management decisions.
The time value of money analysis is done with the help of opportunity costs, by which the investors are able to make better decisions that helps them in earning more value of money in future.
The time line is the visual representation of the time value of money analysis. The time line represents the time periods and the value of cash flows for that period with the interest rate.
The single number which is used is the rate of interest, as the rate of interest is an important factor in this analysis.

Conclusion

Thus, the opportunity cost is the alternative cost, it is an important factor in time value of money analysis, and the interest rate is the single number used.

Answer 7

Chapter 5, Problem 1Q

Summary Introduction

To explain: The opportunity cost, the concept of opportunity cost used in TVM analysis and where it is shown on time line.

Introduction:

Opportunity cost: The opportunity cost refers to the cost which an alternative investment of the similar risk had given. With the help of opportunity cost, the investor can choose the better lender as the best rate of return can be determined. The future value of money can be increased with the help of opportunity cost.

Time-value of money analysis: The time-value of money analysis refers to that analysis which is done to understand the change in value of money with time. With the help of this analysis, it is determined that whether the value of money is increased or decreased with time. This analysis is used in financial and investment decisions and is very helpful for financial users and investors.

Answer 8

Expert Solution & Answer

Answer to Problem 1Q

The opportunity cost refers to that cost which is left out to choose an alternative of the similar type and risk. If the risks associated with two options are the same and the individual has to choose one, the cost associated with that thing which is left is the opportunity cost.
That is why opportunity cost is also called as the alternative cost.
The opportunity cost plays an important role in the decisions of the user and in many other management decisions.
The time value of money analysis is used by the investors. With the help of opportunity cost used in the time value of money analysis, the investors can choose the lenders which will give the best rate of return. When that option is chosen which gives the best rate of return, the future value of money is increased.
The opportunity cost is shown for every cash inflows and cash outflows on a time line.
In all the given situations, the interest rate is utilized as the single number.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The opportunity cost is a very important factor in making financial and management decisions.
The time value of money analysis is done with the help of opportunity costs, by which the investors are able to make better decisions that helps them in earning more value of money in future.
The time line is the visual representation of the time value of money analysis. The time line represents the time periods and the value of cash flows for that period with the interest rate.
The single number which is used is the rate of interest, as the rate of interest is an important factor in this analysis.

Answer 12

Conclusion

Thus, the opportunity cost is the alternative cost, it is an important factor in time value of money analysis, and the interest rate is the single number used.

Answer 13

Ch. 5 - Prob. 1Q Ch. 5 - Explain whether the following statement is true or...Ch. 5 - If a firms earnings per share grew from 1 to 2...Ch. 5 - Would you rather have a savings account that pays...Ch. 5 - Prob. 5Q Ch. 5 - Prob. 6Q Ch. 5 - Banks and other lenders are required to disclose a...Ch. 5 - Prob. 8Q Ch. 5 - Prob. 1P Ch. 5 - PRESENT VALUE What is the present value of a...

Answer to Problem 1Q

Explanation of Solution

Want to see more full solutions like this?

Chapter 5 Solutions