Discount Realty

Business rate discount plan 2

PART ONE:

A.

When the discount rate is 6%

PV = Future value / (1 + r) t

Where r is the discount rate and t is the time during the year

PV = 5000 / (1 0.06) 1

PV = 4716.98

When the discount rate is 5%

PV = 5,000 / (1 +0.05) 1

PV = 4761.90

B.

An account of $ 3,000.00 per year interest rate 4%

PV = 3000 / (1 0.04) 1

PV = 2884.62

Account B $ 8,600.00, two years. Both accounts earn 4% interest

PV = 8600 / (1 0.04) 2

PV = 7951.18

C.

We use the formula:

PV = cash flow / (1 + r) t

Where r is the discount rate and t is time in years

Discount 8%

year

rate

current value

1

32,000,000

8%

29,629,629.63

2

62,000,000

8%

53,155,006.86

3

89,000,000

8%

70,651,069.45

Discount rate 6%

year

rate

current value

1

32,000,000

6%

30,188,679.25

2

62,000,000

6%

55,179,779.28

3

89,000,000

6%

74,726,116.19

Discount rate 4%

year

rate

current value

1

32,000,000

4%

30,769,230.77

2

62,000,000

4%

57,322,485.21

3

89,000,000

4%

79,120,675.92

Analysis up with different discount rates, it is clear that the higher the discount rate is higher than the current value, the higher the discount rate then lower the present value of years, this means that investors need less when the discount rate is higher and will be required to invest higher amounts when the discount rate is low.

Part II:

Business Plans:

We have three business plans that include ice dreams, Wagner Realty Associates and Interstate Travel Plan School Plan, the Plan Ice Dreams is an analysis of the possible activity of selling soft drinks, the investment required is 10,000 and cash flows for the three years was 24,000, 36,000 and 50,000. assumed interest rate is 13.50% and 42000 to be assets acquired through a loan.

Wagner and Associates Realty plan is an analysis of the real estate business that require capital of 60,000 and an investor will invest two 20,000 and the remaining 10,000 will be financed by a loan, the interest rate is 10% technical. The market size is expected to grow by 3% over the years and the net value of the company should be 193,211.

Interstate Travel Center plan a business plan that requires capital 2.75 million, 2.5 million in capital will be financed by a loan and 250,000 is what the investor to invest. The market must have an average of 3.63% growth and labor costs are expected to 481,672 per year, but the benefits tend to be high.

The business plan with the greatest risk is the Interstate Travel Center Business Plan, the first reason that contains the biggest risk is that the investor is required to invest 250,000, which is a high amount compared with the other two plans. The plan to lower the risk of ice dream plan because it requires only 10,000 of investment.

On the current value and returns, it is clear that the current value of Plan Ice Dreams is clear that the cash flows for the three years was 24,000, 36,000 and 50,000 and the expected discount rate is 13.5%, which means that the current value of the investment is:

year

rate

This value

0

-10,000

1

24,000

13.5%

21,145.37

2

36,000

13.5%

27,945.43

3

50,000

13.5%

34,196.56

As calculated above summarizes the present value of the business plan, the discount rate applied is 13.5% and the current value shows that this is a good investment option.

For travel between the investor will have to increase 250 thousand, this plan shows that there are high costs and no plan of expected cash flows, so that an investor should not participate in an activity value of very little information about the benefits package and yields.

References:

Sample Business Plan (2008) business plan dream ICE Retrieved on September 25

Sample Business Plan (2008) J Wagner and Associates Realty plane, retrieved September 25

Sample Business Plan (2008) Plan Interstate Travel Center, retrieved on September 25

About the Author

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