Business Finance: Time Value of Money, Intrinsic Value of Assets, and Investment Decisions

Business finance

Table of Contents
Clients financial questions...............................................................................................................3
1....................................................................................................................................................3
2....................................................................................................................................................3
3....................................................................................................................................................4
4....................................................................................................................................................4
Clients Investment...........................................................................................................................5
1....................................................................................................................................................5
2....................................................................................................................................................5
3....................................................................................................................................................5
4....................................................................................................................................................6
5....................................................................................................................................................7
a)..................................................................................................................................................7
b)..................................................................................................................................................7
REFERENCES................................................................................................................................1

INTRODUCTION
Business finance refers to the funds availed by the business owners for the start-up and
development of the businesses. The report will discuss the compounding technique of time value
of money to calculate the effective rate of interest. This report will also discuss why the non-
compounding technique is better than compounding technique along with why monthly
compounding is better than annual compounding. The report will also discuss the concept of
intrinsic value of assets and what happen when selling price of assets is lesser than the intrinsic
value. This report help in identifying business finance issues and their solution which help the
which company can attain its operational and financial objectives.
Clients financial questions
1.
The non-compounding technique is more preferable than annual compounding to the
investors because some time annual compounding became expensive as compared to monthly or
quarterly compounding. The annual interest is normally at higher rates because of the
compounding and when the investors get interest at the same rate throughout the year. Then
getting monthly and quarterly payment rather than annual payment is best as the investors will
get higher interest amount (Khechine, Raymond and Augier, 2020). But it is not that much affect
the income because basically there is no difference between the annual and monthly interest
when the investors want to withdraw the capital. The monthly interest income is preferable to the
investors even though the interest rate is lower because it provides cash in hand and strong
liquidity position to the investors.
2.
In case of simple interest rates, the interest amount is calculated on the outstanding principal
amount only and accordingly, the borrowing made on simple interest are considered to be
cheaper.
While in case of compounding interest rate, the amount of interest is calculated in each period on
the basis of outstanding principal amount + outstanding interest amount as well. Therefore, by
calculating an effective rate of interest is calculated for the purpose of determining the rate at
which interest is to be charged on the outstanding balance of both principal and interest amount
(Marty, 2020).