Value

=Value=

Value is a very general term used to measure the worth of something. Economic value of something is generally referred as how much a product or service is worth to someone relative to other things. It is usually measured with a certain quantity(usually with money and more specifically with price) that represents how someone feels about something.

Example:
The man bought the ball for $10.00. The man vaules the ball to have a worth of $10.00 or more.

It is also a measurement to place a number or rate on something.

Example:
The family had their land appraised so that they could put it up for sale.

Present Value (PV)
The amount that would have to be invested today, at //i// (interest rate) and //n// (number of years) to obtain a desired future value(FV).

PV = FV / ( 1 + i ) ^ n

PV = Present Value FV = Future Value i = the rate of interest n = number of years

Example:
The present value of $10.00 in 10 years with an interest rate of 7% PV = 10/(1+.07)^10 PV = 5.08 If you invested 5.08 today at 7%, you would have 10.00 in 10 years.

Net Present Value (NPV)
The net present value is the present value(PV) minus the cost(C) associated with the deal or project

NPV = PV - C

Example:
A fim can invest $100,000 today and it will see savings of 60,000 in year one, 13,000 in year 2 through 5. The interest rate is 8%. Should the company do the project? NPV = (60,000 / (1+.08)^1 + 15,000 / (1 + .08)^2 + 15,000 / (1 + .08)^3 + 15,000 / (1+.08)^4 + 15,000 (1+.08)^5)-100000 NPV = (55,556+12,860+11,907+11,025+10,209) - 100000 NPV = 101,557-100,000 NPV = 1,557 The Net Present Value is positive, so the investment would make the company money.

=Questions= 1. For the equation 4//y// = 2//x//, which of the following statements is true? (A) The value of //y// increases 4 times as fast as the value of //x//. (B) The value of //y// increases 2 times as fast as the value of //x//. (C) The value of //y// increases 1/2 as fast as the value of //x.// (D) The value of //y// increases 1/4 as fast as the value of //x//.

2. If x=-2, y=3, and //z//=-4, what is the value of (A) -13/12 (B) -5/12 (C) 5/12 (D) 11/12

3. What is the present value of $1000 which will be given to you 5 years later when the interest rate is 10%? (A) $352 (B) $947 (C) $510 (D) $621

=Answers= //#1 Answer: C If we divide both sides by four the resulting equation becomes:// y = 0.5x. //Examining this equation we can see that everytime// x //increases by one that// y //will increase by 0.5 and therefore is increasing 1/2 times as fast as// x.

//By substitution, we get// (2(-2)^2 - (3))/3(-4)//. Doing the math we arrive at// (8-3)/-12 //which is// -5/12.
 * 1) 2 //Answer: B//

//As a reminder here is the equation for present value presented above:// PV = FV / ( 1 + i ) ^ n
 * 1) 3 //Answer: D//

PV = Present Value FV = Future Value i = the rate of interest n = number of years

//In this question,// FV=$1000//,// i=10%//, and// n=5 //years. Substituting this becomes:// PV = $1000 / ( 1 + 0.1 ) ^ 5

//Using a calculator we solve for PV:// PV = $1000 / 1.61
 * PV = $621**

=Reference= Wikipeida http://en.wikipedia.org/wiki/Value