Time Value of MoneyKnowledge Center 
11 items • 14.446 visits
What is the Time Value of Money? Meaning.The Time Value of Money is the fundamental financial concept that an amount of money in hand today is worth more than the same amount of money in the future. This is caused by the return that you could earn on investing the money or simply placing it in a bank account and receive interest. Time allows one the opportunity to postpone consumption and earn interest. Not having the opportunity to earn interest on money is called Opportunity Cost. There is also a risk factor included in the term, because $100 today is more certain than $100 in a year from now. Examples of Time Value of MoneyThe Future Value of an amount PV in n years with interest rate r can be calculated as follows: FV = PV x (1 + r)^{n} Example. How much will €100 be worth in 2 years, presuming an interest rate of 4%? FV = €100 x (1 + 0,04)^{2} = €108,16 The Present Value of an amount FV in n years from now with interest rate r can be calculated as follows: PV = FV x 1 / (1 + r)^{n} Example. How much is €100 in 2 years worth now, presuming an interest rate of 4%? PV = €100 x 1 / (1 + 0,04)^{2} = €95,20
Compare with: Net Present Value  Depreciation  Amortization  Rule of 72  Residual Value  Internal Rate of Return  Discounted Cash Flow  Time to Market 

Return to Management Hub: Decisionmaking & Valuation  Finance & Investing More on Management  Return to Management Dictionary 
This ends our Time Value of Money summary and forum. 
About 12manage  Advertising  Link to us / Cite us  Privacy  Suggestions  Terms of Service
© 2022 12manage  The Executive Fast Track. V15.8  Last updated: 2892022. All names ™ of their owners.