BBA/15/0012 EKANAYAKE D.W.C.P.

1. Design and format the above document in Ms Office 2007 according to

the given instructions

The time
value of
money and its
uses
Introduction
The value of money today and the value of same money in future, is it same or
different? An old saying is that A bird in the hand is worth two in the bush.
Similarly money today is worth than the same money tomorrow. The Rational
behind this statement could be illustrated as follows.

Figure 1 : the Ration behind the statement

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The Use of money falls in to two broad categories. In other words money could
be either consumed or could be invested. Therefore one has to make a
choice whether the money with you will be consumed or invested since there is a
tradeoff between these two decisions. If you make the choice of consuming
money you forego investment and if you make the choice of investing money
you forego the consumption. A person making the choice of investment has
to sacrifice the consumption and the scarification therefore should be
compensated. Therefore anybody sacrificing consumption and investing should get
something more than the investment amount in future.
This argument is often called as the Opportunity Cost. That is, investing money
in a business will forego consumption or investing in a bank deposit. Therefore the
main reason the future money is less valuable than todays money is due to the
opportunity cost factor. Hence, the reasons for Time value of money are as
follows.

Risk & Uncertainty: Since the future is with a lot of uncertainty there is a risk
in the future cash inflows. Therefore receiving cash today is preferred than
in future.

Inflation: In an inflationary economy, the money received today has a

higher purchasing power than the money received in future.

Consumption:
consumption.

Investment opportunities: An investor can profitably employ money

today to receive a higher value in future. This is referred as Opportunity
cost.

Individuals generally prefer current consumption to future

Time lines and calculation of value of cash in different

times
When cash flows occur at different points in time, it is easier to deal with them
using a time line. Time line will indicate the timing and the amount of cash flow
streams. Since the values of cash differs according to the time the cash flow
happens it is easier to convert all cash flows that happen in different point of time to
one particular point of time. Let us consider the Time line and observe the cash
flows that occur in different periods of time.
The illustration shows that your cash outflow today is considered as Year 0. Cash
flows after one year is considered as Year 1 and cash flows after two

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years considered as Year 2 and continue in the same pattern. All the future
cash flows do not carry the value indicated due to the opportunity cost
factor.

Figure 2 : Cash Out Flow

Valuation Concepts
The Time value of money concept establishes that there is a preference of
having money at present than a future point of time. That means a person should
pay in future more, for money received today.
Imagine you deposit Rs.100 in the bank today for an annual interest rate of 10%
lets see how much you get after one years time.

Therefore It is evident that,

This formula enables us to calculate the future values of cash flows .Therefore this
computation of future value is called as Compounding.
According to the above formula we could re-arrange the equation as follows,

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This formula enables us to calculate the present values of future cash flows.
Therefore this computation of present value is called as Discounting.
The conversion of cash flow values to one time horizon allows us to compare
cash flow values that occur over a period of time, enabling us to make decisions.
The discounting factor is generally considered based on the opportunity cost
that is money market rate or the one year bank fixed deposit rate.
Let us consider an example, where a project has an initial cash outlay of RS
9000- and witness cash inflows for four years. The future cash flows are
discounted at 20% to compute the present values. The total of discounted future
cash flows could be compared with the initial cash out flow to measure whether the
investment is worth. If the difference between the initial cash outflow and the
total of discounted future cash flows (NPV) is positive ,it is evident that the
investment yields a return that is more than the discounted rate (opportunity
cost).
Table 1 : Net Present Value

Cash Flows
Cash Out/
Cash In
Discount
factor
(20%)
Discounted
cash flow

Year 0
-9000

Year 1
1000

Year 2
1100

Year 3
1000

Year 4
11000

0.833

0.69

0.57

0.48

-9000

833

764

636

8680

Therefore Time value of money calculation helps us to make precise decisions

when cash flows occur in different periods of time.

Multiple Compounding Periods

Interest can be compounded Monthly, Quarterly and Semi Annually. If compounding
is quarterly, annual interest rate is to be divided by 4 and the number of years is to
be multiplied by 4. The formula to compute the compound value is,
mxn

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2. Answer following questions.

1. What are the main parts of a computer? Explain then briefly.
(provide a diagram)

(Image
courtesy;
http://res1.windows.microsoft.com/resbox/en/windows
%207/main/6d80ae20-99b2-45dc-8118-a4a34d7c3cf4_46.jpg
(accessed
30-052015; 0935 hrs.)
1. Monitor Visual display unit; this creates the link between user and the PC. It
displays information as graphics, letters or even as numbers, so the user can
identify them. There are cathode ray tubes and LCD monitors. Cathode ray
consume more electricity compared to LCD.
2. System Unit; this is the brain of the PC. It includes mainly Mother board,
processor, RAM, Hard drive and graphic drives. All the data are processed
inside this unit convert them in to useful information. Common processors are
Intel and AMD. Normally system unit got diskette drives and CD drives, which
can be used to feed data into the system.

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3. Keyboard- this is used to type data into the computer, Keyboard may be
wired or wireless. QWERTY is the most common keyboard layout.
4. Mouse a small device used to point to and select items on VDU screen.
Mouse may be wired or wireless. GUI is achieved mainly through mouse.
5. Speaker Outputs the sounds of data file. May be music or PC commands.
6. Printer Output device which is useful in printing documents or data. Printer
may be Dot matrix, inkjet or laser. Laser printers are the most common ones.
Printer may be black and white or coloured one.
7. Modem Used to connect with internet. Converts analog to Digital and digital
to analog signals.
2) Write short notes on the microcomputer and minicomputer including
their performance and differences.
Microcomputer
Microcomputer depends on a microprocessor. Small in size. E.g.; Desktops or
notebooks. Most of the time these are used by individuals for single purposes like
entertainment, documentation or data processing in small scale. Major components
are mother board, microchip, RAM, data bus system, ROM and input output devices
connected. Less costly. Less powerful and slower than minicomputers.
Minicomputers
Widely used in mid-scale firms and in universities. These are larger than micro PCs
and value is high. Fast and reliable. More fast. Minico. Is a multiprocessing one
which can be addressed by several users at the same time. Payroll, accounting and
research purposes are some widely using areas of minicomputers. Not like in micro ,
mini uses magnetic tapes or magnetic disks to store data. Eg - IBM 9375
3) What is a computer software?
A set of properly written data and instruction that runs on a computer. They may be
set of instructions or can be used to make the attached hardware work properly. Two
types are application software ( to do more specific tasks like graphic creation eg;
Corel draw, or animation creation like Maya) and system software. These system
software are the bases of a PC. It coordinates all the hardware and user activities.
E.g. Windows XP by Microsoft and Mac Os X by Apple Inc. Software is created with
specific programming languages like Java or Ruby.
4) Describe the advantages and disadvantages of WWW technology.
Advantages
Cheap access by every body

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24 x 7 x 365 availability
Can be accessed from anywhere/ Global reach
No barriers to entry
Continuous updating of source data
Socially interactive
Global participation
Obtain huge amount of data at a short time
Comparing different sources help to get the best knowledge.

Disadvantages
Not always reliable
Malicious web attacks/ hacking or theft
Violation of privacy
Quality control is not available
No regulation over data
No guarantee of finding what one is looking for
difficult to filter and prioritize data
Data overload
5) What is a computer network?
A connection of two or more computers and related hardware like modems, routers
and data cables. Networking helps to share information and knowledge. Local area
networks, wide area networks and Metropolitan area networks are examples.
6) Describe the importance of computer network to a organization like a
Bank.

Electronic transfer of funds and data

Help to generate various reports at an ease
Information sharing
Cost reduction by sharing resources
Coordination between different sections like credit department and Bank
teller systems
Time saving
Help identify theft and fraud easily
Easy to supervise the entire staff by the management

7) What is URL
Uniform Resource Locator or the internet address. URLs help access HTML pages
from the Web.
8) Name the components of the following URL
http://www.pdn.ac.lk/cs/marks.html

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http:// - PROTOCOL
WWW. subdomain
pdn.ac.lk domain and domain suffix
cs/marks directories
html web page
9)

Describe the advantages and disadvantages of mail merge.

Advantages

Easy to arrange and easy to create letters in thousands

Saves time
Address a large number of letters without having to do it by the user
Standard letter can be saved and reused
Higher rate of personalization

Disadvantages
Data must be up-to-date
Phishing or Scamming threat
Can be used for fraudulent purposes and for junk mail
Letters can lack the personal touch/ not generic
10) What are the steps you should follow to create five envelops for five
different address
using mail merge facility
I.

Select Envelopes

II.

Next: Starting document

III.

Change document layout

IV.

Click Envelope Options Start from existing document

V.

Select recipients

VI.

Arrange envelope

VII.

Insert Address Block

VIII.

Preview the envelopes

IX.

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Complete the merge