Week 2 DQ

Due Wednesday min 300 words per question

Time Value of Money

What effects do compounding and discounting have on your own financial futures?  As an example, consider the difference between investing $10,000 for 20 years at 4% and 8%.  What effect does the difference in interest rates have on compounding?

Annuities

What is the value of annuities?  What are examples of annuities that affect our personal financial plans and expenses?  What are benefits of deferred annuities?  What are critical considerations?

Risk Analysis

What are common risks faced by all prospective business ventures?  Why are they important?  How should they be addressed?

Challenges of Forecasting

Years ago, I had a boss who might be characterized as cynical when it comes to the task of forecasting.  His position was that, by definition, no forecast could be accurate ~ there were just too many variables that were out of our control.  He noted that the difference between exceeding the forecast and under-running it was that in the former case, you would get a chance to do it again.  

What are the critical elements to preparing a good forecast?  How would you manage the process to assure that the best possible information is integrated?  What are necessary contingencies?  Why?

Cost of Capital/Financial Leverage

What are main elements in calculating the cost of capital?  How does an increase in debt affect the cost of capital? How do you identify an organization’s optimal cost of capital?