When you are faced with myriad choices for a life insurance policy (and it seems like the salesperson is speaking a foreign language), you might use the cash accumulation method to decide which "cash value" policy is the most cost effective. Cash value means you not only get insurance coverage but you also accumulate some cash over time.
Let's say two different policies have the same death benefit (the amount your heirs will receive upon your demise) but the yearly premiums are different. You will need to make adjustments in your calculations to make sure you are comparing apples to apples when deciding which has the higher cash value. Say both policies have a face value of $300,000 at the end of 15 years. Policy A has a yearly premium of $1,500 and Policy B's premium is $1,000. You will need to subtract the two and "set aside" $500. Then apply the interest rate of 5% to the $500...that equals $25, so the total set aside is $525.
When you subtract this amount from the lower premium policy you can compare the two cash values, $300,000 for Policy A vs. $299,475 for Policy B.
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Finance: What is a Cash Cow?0 Views
Finance a la shmoop what is a cash cow? that feels good [Person milking a cow]
mmm that's the spot yep that's me I'm a cash cow and boy howdy does that ever
feel good in the morning well I'm a type of company that's a natural part of the
business cycle and which kind of goes like this [Business cycle chart appears]
early companies are cash pigs those pigs eat everything including tons of cash
and let me tell you what comes out of them
it ain't milk...young companies need cash capital to grow like to build server
farms yeah like that and you know different kinds of farms and oil rigs
and chemical synthesizing plants and tractors smelting factories and stamping
machines and massive robotic thingamabob makers those well those early companies
chew up tons of cash as they build their business early in their cycle building
revenues and they might burn, i dunno five million dollars in year 1 to make 1 [Stack of cash burning]
million dollars in revenues not profit that's just in revenues then they pig
out on 20 million dollars in losses in year 5 but by then maybe they have a
hundred million dollars in revenues then they begin to chill as they grow out of
being a pig into yes higher life-forms like me where they maybe start to break
even on 500 million in revenues and no losses and no profits just
breakeven and by the time they've truly evolved into me, way over here on the
bell curve of their lifecycle then they're producing tons of cash like this
CD company which now has three billion dollars of revenue in a billion bucks in [CD 'R' Us store appears]
cash profits unfortunately its future doesn't look all that great as revenues
have likely more than peaked and it'll produce a whole lot less cash in the
next decade as they you know kindly put it out to pasture so if it doesn't buy
more growth companies with its cash yeah then it becomes dinner [Butcher slicing meat and blood appears on camera lens]
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