What is Time Value of Money?

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Use case study to prepare a financial analysis report for Home Depot Inc. You will include in your analysis the background calculations and managerial analysis for each of the following topics: time value of money, stock and bond valuation, and capital budgeting.

Prompt: Calculate time value of money figures and use the results to support your explanations of the present and future value of Home Depot Inc. Complete your calculations on the designated tab in the Final Project Student Workbook (Time value of money tab only).

Specifically, the following critical elements must be addressed:

I. Time Value of Money

A. Calculate the following time value of money figures:

1. Calculate the present value of the company based on the given interest rate and expected revenues over time.

2. Suppose the risk of the company changes based on an internal event. Recalculate the present value of the company.

3. Suppose that a potential buyer has offered to buy this company in five years. Based on the present value you calculated above, what would be a reasonable amount for which the company should be sold at that future time?

B. What are the implications of the change in present value based on risk? In other words, what does the change mean to the company, and how would you, as a financial manager, interpret it? Be sure to justify your reasoning.

C. Based on the future value of the company that you calculated, and being mindful of the need to effectively balance portfolio risk with return, what recommendation would you make about purchasing the company as an investment at that price? Be sure to substantiate your reasoning.

Case Study Link – https://www.sec.gov/Archives/edgar/data/354950/000…

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