Time Value of Money

You were selected as the new Chief Financial Officer of Acme Medical Center, a 1,000-bed academic medical center in the suburbs of a city with a population of over 1.8 million. The hospital board recently decided to investigate ways to increase revenues. The facility has the benefit of different revenue streams including patient revenue and money from investments.

The hospital recently sold property for $300,000. The hospital board wants to invest $70,000 at 5% in an ordinary annuity and receive annual payments of 10,000 over the next five years. What is the future value of this ordinary annuity investment?

The board is considering other options for investing the remaining money. They want to double their investment of $70,000 over the next 12 years by using conventional securities with a projected return of 6%. Does the present value of the investment indicate that this is possible?

Problem Questions:

1.Discuss the concept of time value of money. What is it? How is it used?
2.What is an ordinary annuity investment? What are the advantages and disadvantages of this method?
3.Calculate the future value of this ordinary annuity investment in this scenario? Be sure to show your work.
4.Calculate the present value of the investment and indicate if it is possible to double the money?

Assignment Expectations
Use the information in the modular background readings as well as resources you find through Proquest or other online sources. Bookmark online financial calculators to assist with the computations or construct EXCEL spreadsheets. Please be sure to cite all sources and provide a reference list at the end of the paper. Submit the paper as a WORD document through the link provided for the assignment.

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