Households/Consumers: Suppose you inherited $1,000,000 from your grandfather. You want to determine how to use this money.

Appraise the time value of money (TVM) in the PV-FV analysis.

Carefully evaluate the factors that you should consider in your financial decision making.

How might other current economic factors such as the inflation rate, interest rates, and/or the stock/bond prices affect your decision?

What would you do with the $1,000,000 that you inherited from your grandfather?

Firms/Producers: As a director of a company, you are responsible for determining whether to launch a new project. Your company is willing to invest $500,000 for a new project provided that it will make at least the equal amount in five years.

Carefully evaluate the factors that you should consider in your financial decision making.

Explain the difference between the PV and the net present value (NPV). What is your decision rule for a new project (using the NPV analysis, the internal rate of return [IRR] analysis, or the payback analysis)?

How might other current economic factors such as the inflation rate, interest rates, and/or the stock/bond prices affect your decision?

If you decide to launch a new project, describe what that would entail.