Fin301 Module 2 Case Assignment

1410 words 6 pages
TUI UNIVERSITY
Module 2 Case Assignment
FIN301 - Principles of Finance
Dr. Alan Harper
March 5, 2011

Part I:

A. Suppose your bank account will be worth $15,000.00 in one year. The interest rate (discount rate) that the bank pays is 7%. What is the present value of your bank account today? What would the present value of the account be if the discount rate is only 4%?

Present Value at 7%
$15,000/1.07=$14,018.69

Present Value at 4%
$15,000/1.07=$14,423.08

B. Suppose you have two bank accounts, one called Account A and another Account B. Account A will be worth $6,500.00 in one year. Account B will be worth $12,600.00 in two years. Both accounts earn 6% interest. What is the present value of each of these accounts?
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This entrepreneur is also expecting aggressive sales and profit over the first three-years, by doubling each year, between agent sales and broker's sales. If successful, investors should expect a high discount rate for investment dollars.
Interstate Travel Center Truck Stop Business This business has a very high chance for success. Thus, I estimate the Interstate Travel Center Truck Stop Business to be moderate risk, providing investors for a moderate discount rate. In my own personal experience, these "all-in-one" businesses provide a variety of service which caters to more than the patron seeking a stop for gas. Human nature is to get as much accomplished n one stop as humanly possible. This is due to convenience, time, and to avoid unnecessarily burning valuable fuel, especially at today's prices and future forecasted cost of fuel. Most every gas station makes its profit from the sale of products sold within the store. Most of these items generate much higher profits than gas. Fuel sales only attribute to about 30% of a service station's profit (Associated Press, 2008). The revenue earned from fuel sales goes to the oil companies and sales taxes to the city, county, and state. This is a larger business than that of the previous two businesses evaluated, with more employees and more facets to the operation of the business. There will be greater dependence on employees, and that the employees create success within their area of the operation;

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