Part 1 Reply to Discussion
“Present Value” Please respond to the following:
- Consider a long-term debt you currently own (e.g., a mortgage or student loan) and discuss how you would take present value into account when deciding whether you should retire that debt ahead of schedule. Explain your rationale.
- From the e-Activity, discuss why it is important to use present value when conducting the cost-benefit analysis of the project you researched. Provide specific examples to support your response.
Part 2 Reply to Statement Below seperate from discussion
Having owned several cars in my life , I would have only accepted zero 0% financing for every auto purchase. We all know cars are depreciating assets and the minute we drive off the car lot the value drops.
I was surprised to learn paying off the car loan early , I will still have to pay interest on the entire duration of the loan. There is no way of avoiding paying the interest simply by cutting the loan period short ; Strayer family the entire amount has already been
folded into the balance of the loan. I would recommend using the additional funds to pay off high credit card bills or mortgage and look always for zero -percent financing or low interest car deals when you shop for a car in the future.
It is important to use the present value when conducting a cost-benefit analysis on a project because one will get a more accurate result by converting all future costs and benefits to their present values.
Subtracting the present values of all costs from the present values of all benefits gives you the net present value of the project.