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––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– F I N A N C E 1 0 1 Version 2.1 “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ An Aid To Making Intelligent Financial Decisions Charlton Woolard 24920 Towne Rd. #301 Southfield, Michigan 48034 ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– NEW UPDATES TO FINANCE 101 Version 2.1 “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ . Option A1 - ALL ABOUT LOANS includes option A1-1 which now has 5 different amortization schemes (vs four). The 5th amortization scheme allows you to specify the monthly payment amount as a percent of the outstanding balance. As an added feature, you may enter the date of the first payment and Finance 101 will track the correct date for all payments. In addition, a rate versus payment amount comparison table has been added. . Option A1 - ALL ABOUT LOANS also includes option A1-2 which accepts information of up to 15 loans, and provides the fastest optimized pay-off strategy for the combined monthly payment amount. In addition, you are allowed to enter either a new (higher) amount, or new (lower) time period, and details describing the effect of this change is provided. You may also specify when the new payments are to start. . Option A3 - BUY VS RENT has been improved to include the effects of mortgage interest deductions as part of the comparison analysis. . Option B1 - BUYING A COMPANY includes a submenu which serves as the gateway to B1-1 - BUYING & SELLING A BUSINESS and B1-2 - BUSINESS FINANCIAL PERFORMANCE ANALYSIS. . Option R1-2 REFINANCING - IS IT WORTH IT ? has been improved to consider both the tax and equity considerations. . Option R1-5 MORTGAGE QUALIFICATION is a new addition that determines the amount of mortgage loan you should qualify for, given your income, monthly expenses, and other basic parameters. . A monthly calender is available by hitting any function key. . All entries can perform calculations as long as the total number of characters do not exceed 10. . Option G6-3 LINNEAR REGRESSION now allows you to automatically increment the x coordinates by the last entry amount (when entering X & Y data points) by simply typing a "c" as part of the previous x data entry. . Option G6 - COMMUNICATIONS & MATH TOOLS now includes suboption G6-6 - CALCULATOR which is a full function calculator. You just enter a formula and the results are provided. . The load time of FINANCE 101 has been cut in half - meaning it will take only half as long for FINANCE 101 to load into memory. . You may now recall your last entries by hitting the <space> bar. The last 25 entries are retained for easy recall. ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– How to use Finance 101 “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ Welcome Screen - color selection Finance 101 generally operates in color, however, if you want a black & white display (often better for laptops or if no color card or color monitor exist with your computer), simply hit "B". A black & white display will begin with the global menu. Global Menu To select an option in Finance 101 select a letter, either A, S, B, I, R or G, to access any one of the six financial segments. This segment will be highlighted with a continuous encirclement. Then hit any number between 1 and the highest number within the segment to select the option you want to use. Interface Screens The very top line of the screen, the headliner, always tells you what option you are running. If you are in an option accessed through a second level menu, both the primary and secondary descriptors are displayed in the headliner. Additionally, some options have major sub-segments that are distinct from other segments within the same option. In these cases, you may see a descriptor in the headliner that informs you of what segment you are in. Within A is B and within B is C. C is where you are currently. The very bottom of the screen is reserved for "what do you want to do next?" prompts. If you are finished with a particular calculation you may be asked if you want to do "Another ? (Y/N)" (with a blinking "?"), or if a table is being displayed you will be asked whether or not you want to "Continue ?". For convenience, practically any key other than ESC, "n" or "N" will be accepted as YES. If a continuous scroll of information is being displayed and exceeds the length of the screen, a "Pausing - Hit Any Key" prompt will appear. Lastly, if you are answering a series of questions, a prompt indicating an up-arrow to "Re-ask questions" will appear. If you hit the up-arrow key, PgUp or Home key, the questioning sequence will start over and your previously entered entries will be erased. In addition, you may recall up to 25 previous entries by hitting the <space> bar. Finance 101 displays its financial information between the top headliner and the very bottom line of your screen. The Friendly Q&A/Selection Approach Finance 101 uses the "Q&A/Selection" approach making Finance 101 extremely "user friendly". When all questions are answered with legal numeric entries, the calculation is performed immediately and results displayed. Legal entries are any correct representation of a number (if you find it represented that way in most books, it is legal). For example, "2500" may be entered as "$2500", "2,500", "$2,500.00" or any other normal representation. As another example, eleven percent will be accepted as "11", "11.00", "11%" or "11.00%". Finance 101 is so friendly that it accepts any legal numeric representation within 10 characters. In addition, several options allow you to select what you would like Finance 101 to calculate, simply by not answering the question. For example, you may be presented with 3 questions - Years ?, Loan Amount?, Payment Amount?, but asked to answer only 2. The unanswered question which you left blank, by simply hitting <RETURN>, will be calculated for you. Unlike other financial packages, with Finance 101, you do not have to exit the questioning sequence, enter into some compute mode, and then tell the computer what to compute. Artificial Intelligence!? Super Software !? ... no... just Finance 101's way of saving time and adding convenience to your financial questioning and data entry. Thus, illustrating how 3 different financial calculations are combined into one, for more power, enhanced friendliness, and convenience. NOTE: Because of FINANCE 101's unrestricted use of the display screen, very large numbers (i.e. 10,000,000,000) may cause columns of data to run into neighboring columns. If this occurs, you may avoid the problem by dividing all non-percent numbers by 10 or 100 and re-enter. Recommended Approach to Using Finance 101 Whether you are on the road using Finance 101 with your portable computer, relaxing at home while planning your financial success, or at the office evaluating certain "what ifs"... Finance 101 makes financial analysis fun, easy and worthwhile. 1) State Your Financial Question - How much will I have in 5 years if I deposit $313 twice a month in a savings deposit paying 8%? 2) Scan the Global Menu - You will quickly see what option you want to use. 3) Select the option and read the description. 4) Answer the questions and review the results. 5) Perform "What Ifs" - re-run the option using different inputs. Even though you may be satisfied with what you have learned by viewing the results, it is a healthy exercise to change one or more of your inputs and reproduce the results. Performing "What If" analysis is often as educational as knowing the right answer. Finally, you can print anything that appears on the screen by hitting "P" when prompted. Use this feature freely to produce a hard copy of your questions, answers, and results for later review. ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– GETTING STARTED “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ Installing Finance 101 is very easy and convenient. Follow the two-step process below, then get on with making intelligent financial decisions. Oh! as a side note... if you have not already done so, wipe off your computer screen as a first step in seeing your financial future with a clear view. Step One - Copy the Program Disk for Back-up Before doing anything else, copy your Finance 101 diskette and store the original in a cool and safe place. Use your copy as the working disk. If necessary, refer to your PC-DOS/MS-DOS manual for a description of the DISKCOPY or COPY [drive] *.* command. Step Two - Installing on Hard Disk Use the following steps to install Finance 101 on your hard disk. 1) Make a directory on your hard disk for all Finance 101 programs and files. MD\FIN hit <RETURN> 2) Go into the directory you have just created. CD\FIN hit <RETURN> 3) Put your working copy of the Finance 101 program disk in drive A and copy all of the files from that disk into the current directory on your hard drive. Now that you have copied all files onto your hard disk, you can remove the program disk from drive A. Since the program files are now installed on your machine, you do not need to use the program disk when you run Finance 101. Copy A: *.* hit <RETURN> WHEN ALL FILES HAVE BEEN COPIED, SIMPLY TYPE "FIN" TO RUN FINANCE 101 in the \FIN directory. If you are not in the "FIN" directory type "CD\FIN". ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– Let's Talk Finance “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ What is Finance ? ...the system that includes the circulation of money, the making of investments, the obtaining of funds or capital, etc...etc...etc... The simple definition of finance is the discipline of evaluating money or monetary value. That's what finance is really all about - improving or evaluating monetary value. While we could talk about capital assets, financial assets, real assets, capital marketing, capital budgeting, etc...we choose to focus only on the real core concept behind the entire world of finance... and that is the concept of TIME VALUE OF MONEY. Without a doubt, the concept - TIME VALUE OF MONEY is the single most important concept one needs to understand in order to improve their financial situation. Time Value of Money The TIME VALUE OF MONEY can be broken into two basic concepts, present value and future value. Let's begin with present value. The concept of present value is simply the value today of money to be received in the future. It is based on the principle that a dollar today is worth more than a dollar in the future, due to the effects of time and rate of return. Money available today can be used immediately, as in a savings plan, stocks, bonds, or other investments. It can be made to grow immediately and generate a certain rate of return. Money unavailable until some point into the future cannot be put to work until we get it. It, in effect, is sitting idle until it becomes available. As you can see, money received at some point in the future is worth less than money available now. Let's suppose you were asked to choose between a check, to be paid today, for $100,000 OR a special automobile a year from now expected to be worth $105,000. Intangibles aside, your decision should be based only on the present value of the the alternatives. The question is : "what is the value today of $105,000 1 year from now, and is that value greater than $100,000 ?" If we have a $100,000 today, it could be invested. Let's say the rate at which we could grow dollars today is, 9% (as in a savings plan). In order to have $105,000 one year from now, how much money would we have to invest with an expected 9% rate of return. The answer is $96,330, therefore the present value or current market price of the $105,000 1 year from now is $6,330 at a discount rate of 9%. The $100,000 check alternative is the better choice. The FUTURE VALUE is simply the converse of present value. While present value calculations address the question: how much is money available in the future, worth today? Future Value addresses the question: how much is the money available now, worth in the future? The above example can be reevaluated in terms of future value. If we have a $100,000 today and we invest it at 9%, one year from now we will have $109,000. Stated another way the future value of $100,000 at a 9% rate of return is $109,000, which is more than the $105,000 automobile. We have proven in future value terms that you are better off receiving the check today. The NET in Net Present Value The one element missing from the present value/future value concept is the effect of an initial investment or any initial payment amount to you. NET PRESENT VALUE takes the initial transactions into account. The net present value is simply the initial investment amount subtracted from the present value, or any initial payment amount (payment to you) added to the present value; whichever the case might be. ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– A DISCRIPTION OF EACH OPTION “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ A1 - USING A LOAN TO BUY Determines the principal on a loan, the annual interest rate, the payment amount, the number of payments per year or the term of the loan in years. By providing four of the five parameters, the fifth or unspecified parameter is calculated. In addition, the total interest on the loan and the last payment amount is provided. If you specify the payment amount, the present value of the loan is also provided. Further, you may display the amortization table on the loan in any of five methods : Conventional method, Sum-of-the-years digits (or Rule of 78), Graduated Payments (pays interest first), Interest only with balloon payment, or percent of outstanding balance. A2 - TRUE VALUE OF A LEASE Calculates the true value of a lease to better assess lease-to-lease comparisons. Also, compares the net lease value with that of an equivalent loan. A3 - BUY VS RENT (see option B3-1) S1 - ANNUITIES and PERPETUITIES Determines the present value of periodic payments {annuity} at a specific discount rate or the present value of payments made forever {perpetuity} at a specific discount rate. All periodic payments are equal. S2 - SAVING FOR A CERTAIN AMOUNT Determines the total # of years you need to save regular deposits to reach a specific amount, how much will you save if you make regular deposits of a specific amount, or the amount your regular deposits need to be to save a specific amount at a given rate. S3 - SAVING FOR REGULAR WITHDRAWALS Determines the amount of time you can make regular withdrawals of a specific amount, the amount you should invest to allow regular withdrawals of a certain amount over a specified period or, given a certain amount, how much you can you withdraw regularly. B1-1 - BUYING & SELLING A BUSINESS Determines the market values of two firms, the cost to firm "A" of acquiring firm "B", and the net gain or financial benefit of the acquisition. A table of 9 scenarios is displayed showing a price range of firm "B" stock prices, the effected net value of firm "B", as well as the associated cost to firm "A". B1-2 - BUSINESS FINANCIAL PERFORMAMCE ANAYLSIS Analyzes the financial performamce of any public company. The analyses are based on rules-of-thumbs and genarraly accepted benchmarks. B2 - INTERNAL RATE OF RETURN Determines the INTERNAL (or discounted cash flow) RATE OF RETURN and the payback period at a specified discount rate. The internal rate of return is the rate of discount which makes the net present value of a stream of cash flows equal to zero. B3-1 - CORPORATE BUY vs LEASE (ref : A3) Compares the Net Advantage of a Lease to Buying the same asset, over the life of the lease (in years). A sensitivity analysis is also available on a number of selected inputs. [REF : A3 - Buy vs Rent] B3 - 2 CORPORATE BUY vs MAKE DECISION Allows you to accurately determine whether it is better to BUY or MAKE components ("components" is used in the generic sense - it could be anything). A summary of your expenses and a table of your cash flows are provided at your option. B4 - BREAK-EVEN ANALYSIS Determines how many units you need to sell in order to recover both your fixed and your variable cost (i.e. break-even), without making a profit. A 2-column table showing data for both a single unit and the total of all units sold is provided. I1 - I4 INSURANCE EVALUATIONS Life Insurance is best used to provide financial protection before an investment program begins. The purpose of this option is to provide comparisons with basic investment alternatives to help you evaluate the true benefit of insurance and to determine when insurance is required and when it is best to cancel. R1 - MORTGAGE RELATED R1-1 BLENDED MORTGAGE Calculates blended (or combined) rates for up to 20 mortgages. Adding up the mortgages and the monthly payments is the easy part, but determining the blended interest rate is where this option becomes extremely useful. R1-2 REFINANCING Calculates the net gain of refinancing for a specified period, and the effective annual interest rate of a new mortgage (including settlement cost and fees) for the remainder of your ownership. Thus, arming you with a true annual rate for comparison shopping. R1-3 TRUE A.P.R. Determines the true Annual Percentage Rate which includes the real estate fees you will pay on a new real estate deal. The true A.P.R. may be determined on either a fixed or variable rate/variable payment mortgage. If variable, the time adjustable variable payments are displayed. R1-4 LEASE OPTIONS Details the financial characteristics of an option contract in order to assess whether it is worth purchasing {if buying} or worth offering {if selling}. With this tool, you may structure the financial parameters of a lease agreement with an option to buy. A table displaying your structured arrangement for each year of the lease, as well the financial advantage to the lessee is provided. R2 - BUILDING COST EVALUATION Accepts major building costs and appropriately distributes them over the life of the building (70 years max). You will see the effect of construction costs, operating costs, financing costs and replacement costs to accurately assess your true building cost. R3 - FORECLOSURES Helps you consider all possible cost BEFORE bidding on a foreclosure property by entering cost data on 5 dynamic spreadsheets. The 5 spreadsheets include: . MORTGAGE AMOUNTS/MONTHLY PAYMENTS . LIENS & JUDGMENTS . CLOSING COST TO ACQUIRE PROPERTY . CLOSING COST TO SELL PROPERTY . YOUR NET EQUITY R4 - BUYING AND SELLING BANK NOTES BANK NOTES (often similar to second mortgages) may be bought and resold at a profit by simply changing the structure of the note (i.e. decreasing the interest rate and increasing the monthly payments). This option provides a range of new interest rates that you may offer a prospective buyer and the details of newly structured notes associated with the new rates. R5 - REAL ESTATE CONSIDERATIONS This option provides a set of notes for your review and real estate consideration. Topics include : . LARGER CASH DOWN PAYMENT / LOWER PAYMENTS . INTEREST ONLY . PERFORMANCE TRUST DEED . PAYMENTS THAT ARE LOWER THAN INTEREST . GRADUATED PAYMENT LOANS . FINANCE YOUR NEGATIVE CASH FLOW WITH OWNERSHIP . OFFER A PERCENTAGE OF YOUR RESALE PROFITS . TRADE EQUITY IN OTHER PROPERTIES FOR PAYMENTS . SINGLE PAYMENT NOTE . PERIODIC PAYMENTS . BUILD IN DELAYS BEFORE THE INITIAL PAYMENT . GET COMFORTABLE WITH BORROWING . THE POWER OF OPTIONS . RENT PROPERTY TO SEVERAL OCCUPANTS . USE EQUITY TO BUY MORE PROPERTY . BUY FROM BUILDERS WHO WANT OUT . 25% BELOW MARKET OFFER - ALL CASH . BARTER FOR DOWNPAYMENT G1 - PRESENT VALUE/FUTURE VALUE Determines the Present and Future value of a SINGLE PAYMENT or a STREAM OF CASH FLOWS of which you enter. If entering cash flows, the maximum number of entries is 100 and you are allowed to make alterations before the calculations begin. G2 - DEPRECIATION COMPARISONS Allows you to compare the effect of various depreciation methods, namely Straight-line depreciation, Double declining balance, Sum-of-the-years digits, and any other accelerated depreciation method of which you define by providing a depreciation percent within the range of 100 ... 500. G3 - R A T E S This option allows you to explore the effect of rates with 6 different alternatives. It is recommended that you familiarize yourself with all choices. You can use this option to assure that the rate inputs you provide for other options within FINANCE 101 is the exact rate you want to use for evaluations. Rate options include : 1 - EFFECTIVE RATE FROM NOMINAL RATE-AND VICE VERSA 2 - INTEREST RATE FROM PRESENT AND FUTURE VALUES 3 - FIXED vs VARIABLE RATE & PAYMENT COMPARISONS 4 - THE REAL RATE AFTER CONSIDERING INFLATION 5 - AT WHAT RATE WILL YOU DOUBLE OR TRIPLE YOUR SAVINGS ? 6 - TRUE RATE OF DEPRECIATION G3 - 1 EFFECTIVE OR NOMINAL INTEREST RATES Determines the effective interest rate from the nominal or the nominal from the effective rate. G3 - 2 INTEREST RATE FROM PRESENT & FUTURE VALUES Determines the nominal and effective interest rates from the value of the property today and in the future. G3 - 3 FIXED VS VARIABLE RATE & PAYMENTS With this option you may enter estimated interest rate amounts for each year of the loan. The time adjusted variable rate loan payments is then computed and compared against the fixed rate loan. G3 - 4 REAL RATE AFTER INFLATION Determines the real rate after inflation given the nominal interest rate and the inflation rate. G3 - 5 RATE TO DOUBLE...TRIPLE YOUR MONEY Determines how long it will take to double/triple your money. G3 - 6 RATE OF DEPRECIATION : SALVAGE VALUE Determines any 1 of 4 parameters when given the other 3 : Original price, Depreciation rate (in %), Salvage value, or Number of years. G4 - BONDS Allows you to calculate any 1 of 3 BOND parameters : the PRICE of the bond, the YIELD, or the AMOUNT of INTEREST PAYMENTS. G5 - EARNED INTEREST OVER TIME This option provides a table of earned interest for investments. Periodic balance, periodic interest, accumulated interest and the effective interest rate are provided for either a single investment, or an investment with regular deposits or withdrawals. G6 - COMMUNICATIONS/MATH TOOLS Provides access to 6 powerful tools including complete remote communications capability and 5 useful mathematical tools: 1- REMOTE COMMUNICATIONS 2- BASIC STATISTICS 3- LINEAR REGRESSION ANALYSIS 4- SIMULTANEOUS EQUATIONS 5- GREATEST COMMON DENOMINATOR 6- CALCULATOR G6 - 1 REMOTE COMMUNICATIONS Provides basic computer-to-computer communications. G6 - 2 BASIC STATISTICS Provides basic statistical information on a set of numbers that you provide. Statistics include : . Minimum and Maximum . Mode . Median . Arithmetic mean . Weighted mean . Geometric mean . Range . Variance . Standard deviation . Lower and Upper quartile G6 - 3 LINEAR REGRESSION Uses the least squares method to fit a straight line to a set of points (x & y coordinates). In addition to describing the line in the Y = B + MX format where "B" is the y-intercept and "M" is the slope of the line, the coefficient of determination, coefficient of correlation, and standard error of estimate is also provided. G6 - 4 SIMULTANEOUS EQUATIONS This option solves a system of linear equations of the form: Ax1 + Bx2 + Cx3 = K1 Dx1 + Ex2 + Fx3 = K2 Gx1 + Hx2 + Ix3 = K3 where A, B, C, ... are the coefficients you provide, as well as the constants K1, K2, K3... The unknown coefficients x1, x2, x3... will be determined and presented. G6 - 5 GREATEST COMMON DENOMINATOR This option accepts two non-zero integers and returns to you the GREATEST COMMON DENOMINATOR of the two submitted. G6 - 6 CALCULATOR This option accepts your formula and produces the results. Ten trigonometric functions are recognized. ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– DISCLAIMER “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ Clint Corporation makes no warranty of any kind, expressed or implied, including without limitations, any warranties of merchantability and/or fitness for a particular puindirect, special or consequential arising from a failure of this program to operate in the manner desired by the user. Clint Corporation shall not be liable for any damage to data or property which may be caused directly or indirectly by use of the FINANCE 101 program. IN NO EVENT WILL CLINT CORPORATION BE LIABLE TO YOU FOR ANY DAMAGES, INCLUDING ANY LOST PROFITS, LOST SAVINGS, MISSED INSURANCE OPPORTUNITIES OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF YOUR USE OR INABILITY TO USE THE FINANCE 101 PROGRAM, OR FOR ANY CLAIM BY ANY OTHER PARTY. ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– EXAMPLES FOR USING FINANCE 101 OPTIONS “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ EXAMPLES: It's time to wake up and take charge of your finances. Here are eight examples of key financial decisions. How many of these have you experienced so far? 1. You're buying a new car. Your financial objective is to spend the least amount in total over the life of the loan. A dealer offers to sell a car for $14,500 at 11% or $315.27/month - 5 year loan. Another dealer across town has the car for $13,115 at 15% or $365/month, but for 4 years. Clearly the first dealer with lower payments and a lower interest rate has the better deal - right... WRONG! - if the overall cost is your highest concern, you've just wasted $1,395.80 by signing a contract to pay $18,915.81 from the first dealer versus $17,520.01 from the second dealer. Option A1 - Using a Loan to Buy 2. Preparing to go into business for yourself, you've learned about office space renting for $800/month for 8 years. Perfect! because you've made arrangements to provide $800/month to rent office space. The facility is worth $40, with interest rates at 11%, there's no way you could afford to get a loan and buy the facility outright. Seeing a good deal, you sign the lease contract. Later your accountant tells you that your $800/month rent has an equivalent loan value of $50,928.08 at 11%. You could have bought the property, and over $10,000 in new furniture. Whammo! you begin to question your financial decision-making ability, both personally and professionally. Option A2- True Value of a Lease 3. Should you lease or buy your next truck? You can purchase the truck for $15,000 and after 5 years sell it for $7,000 - thus, only really spending $8,000. Or, you could take a 5 year lease on the truck for $200/month. The lease has a $1,000 initial fee, but will save you $150/year in maintenance cost. Well, what are you going to do? Buy the truck - right, and be done with it. Who wants to deal with leases anyway? If you buy, you've just made a $558 mistake because this is the net advantage of the lease over buying. Your $15,000 could have been invested at 9% which would have been a smarter move. Option A3 - Buy vs Rent 4. Realizing the cold hard fact that social security is, at best, unstable. You plan to save for the next 20 years, so that you'll have enough to withdraw $1,000/month for the following 20 years. Your intelligent neighbor tells you to withdraw $1,000/month for 20 years at 10%, you'll need over $100,000. Being so discouraged, you stop your retirement planning and your discipline to save. Unbeknownst to you, only $136.46/month will provided $103,624 in 20 years at 10%, from which you can withdraw $1,000/month for 20 years. Even more interesting; $500/month deposits for 20 years will allow you to withdraw $3,664/month for 20 years - WOW! Option S2 - Saving for a Certain Amount Option S3 - Saving for Regular Withdrawals 5. You're considering opening a small shoe store with $4000. Your average pair of shoes will be priced at $29 and will cost you $12 from the wholesaler. You wonder how long it will take to recover your $4000 if you sell 2 pairs a day. For only 5 days/week, you can't believe that your $4000 is recovered in only 6 months - the rest of your sells are pure profit! You also determine that 2001 pairs sold will net you $30,000 - that's only 5 pairs a day for 1 year and 8 months. Option B4 - Break-even Analysis 6. You want insurance for your daughter. You talk to an agent which offers you a $8,000 policy for only $50/month for 15 years. At which time you will have $5,000 in cash value on the policy. Sounds good to you, so you sign-up. Your daughter returns home from junior high school and is upset when you tell her that in 5 years she'll be able to get $5,000 from her insurance. She makes a quick calculation and informs you inflation that $5,000 will only buy what $3,209 buys today. Further, if you put the $50/month in a savings paying 7% interest, she'll have $15,077 in 15 years vs $5,000. Better yet, she explains, you can get a loan today for $4,836 charging 9% with those payments! Your only response... Gee dear, I didn't know. Option I1-I4 - Insurance Evaluations 7. Just as you were considering buying a new house, the bank offers you a refinancing opportunity to lower the payments of your existing 9%, $450/month mortgage. Your new payments will be only $400/month and your rate is dropped. You now plan to stay in your existing home for another 3 years and take advantage of this refinancing opportunity. Your refinancing fees amount to $3,000 or 5 points of your mortgage. You sign and $3,000. Afterwards, you discover that you will have to stay in your home for at least 5 years to recover your refinancing fees and that your effective rate is really 9.67%. You wish you could have analyzed this a little better. Option R1-1 - Mortgage Related - Refinancing 8. After 25 years of living in the U.S.A. you finally learn that understanding interest rates and the time they are applied is the key to making intelligent financial decisions. As an after thought, you wonder how long it will take your saving deposit to double if the bank is paying 7%?.. how long will it take to triple? The answer is 10.3 years and 16.6 years respectively. Option G3-5 - Rates Keep in mind, these are only a few examples. ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– FINANCE 101 Ver 2.1 SPECIFICATIONS “““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““““ "FINANCE 101 leads you by the hand through the information gathering process. ... Finance 101 works splendidly..." by PCM Magazine. What Finance 101 can do for you. ACQUIRING ITEMS . Full loan amortization schedules . Calculates actual payment dates . Normal amortization, balloon payment, declining payment, rule of 78, graduated payments, interest only . Nominal rate & effective rate . Calculates the missing variable . Accepts any number of payments per year . Determines multiple loan pay©off strategies . Lease valuations . Buy vs Rent analysis SAVINGS PLANNING . Retirement planning - annuity payout & total value . Future value on series of deposits . Time to reach target savings . Required deposits for FUTURE AMOUNT . Requred investment for SERIES OF WITHDRAWALS . TIME TO DEPLETE investment amount . Required withdrawals for TARGET TIME FRAME BUSINESS DECISIONS . Company acquisitions (public companies with stocks) . Business financial performance analysis . Internal rate of return . MAKE vs BUY analysis . Corporate BUY vs LEASE analysis . Break©even analysis INSURANCE EVALUATIONS . Insurance valuations and comparisons - TERM, WHOLE LIFE, LIMITED PAYMENT, ENDOWMENT REAL ESTATE . Blended mortgages . Refinancing evaluation . True APR . Lease options . Mortgage qualification . Building cost proposals . Foreclosures . Evaluating bank notes . Real estate considerations . Real estate terminology GENERAL CALCULATIONS . Present and Future value of amount or series of payments . Cash Flow valuations . Depreciation comparisons - straight line, declining balance, ACRS, sum of years, etc. . Rates - effective from nominal, APR, true rate after inflation, rate of depreciation, fixed vs variable . Salvage value . Bonds - price, yield, coupon interest payments . Earned interest tables REMOTE COMMUNICATIONS/MATH TOOLS: . Remote communications . Statistics . Linear regression analysis . Simultaneous equations . Greatest common denominator . Formula Calculator GENERAL SPECIFICATIONS . Requires 512K RAM . Over 139 total calculations . 26 global menu selections serving as the gateway to over 70 selections . Double Digit Precision calculations . Full function calender . Prints practically from any screen . Handles simple and continuous compound interest . Math calculations performed upon data entry . Features a friendly "Q&A" type user interface which is very easy to use. . Load time = 1.55 seconds on IBM PS/2 Model 70 (Hard Drive) . Load time = 13.2 seconds on IBM PS/2 Model 70 (3.5" Disk Drive) ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– 
