The Time Value Of Money

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Managerial Finance II/FIN476

October 21, 2007

clock Value of Money

The Time Value of Money (TVM) serves as a foundation for either other notions in finance. It influences business finance, consumer finance and government finance. Time Value of Money (TVM) results from the concept of pastime. Time Value of Money (TVM) is an important concept within the fiscal management. It compares investment alternatives and then to solve problems, which involving loans, mortgages, leases, savings, and annuities. “In determining the in store(predicate) value, we measure the value of an amount that is allowed to grow at a given interest rate over a diaphragm of time” (Block & Hirt 2005). “Why would any rational person parry payment into the rising when he or she could have the comparable amount of money now? For most of us, taking the money in the present is just plain instinctual. So at the most basic level, the time value of money demonstrates that, all things being equal, it is better to have money now earlier than later” (Croome 2003).
The concept of Time Value of Money (TVM) is that the one dollar sign bill that smart set has today is worth more than the promise or expectation that the play along will receive a dollar in the future.



Money, which a partnership holds today, is worth more because the company can then invest it and earn interest. Therefore, a company should receive some compensation for foregoing spending. For instance, a company can invest their dollar for one year at a 6% annual interest rate and lay in $1.06 at the end of the year. Therefore, one can say that the future value of this dollar is $1.06 given a 6% interest rate and a one-year period. It follows that the present value of the $1.06 a company can expect to receive in one year is only $1.
One of the key concepts of Time Value of Money (TVM) is that a single sum of money or the series of equal, evenly spaced payments or receipts promised in the future is converted...If you want to get a full essay, browse it on our website: Orderessay



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