1000+ documents containing “time value”.

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value of money reflects the fact that money diminishes in value over time. A dollar today has more buying power than a dollar tomorrow does. The time value of money holds under conditions where there is inflation. As the price of goods and services rises over time, the purchasing power of a dollar diminishes over time. The time value of money concept in finance reflects this reality by translating the nominal value of future cash flows into present day dollars to reflect the difference in purchasing power that occurs over time.

It is important for financial managers to understand the concept of time value of money for a couple of different reasons. The first is that they are often working with their clients in the long run. As an example, if you are working on a retirement plan for a customer, you cannot simply assume that those future dollars --….

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Value of Money

A lot of people today think more about "stuff" than how much money it takes to buy that "stuff." Like a burger. It may be only a buck, but it takes someone working for $10 an hour ten minutes to make that much money, more if you factor in income and other taxes you pay. I'll bet it takes you less than ten minutes to eat that burger, so your time value of money is negative, which means, the item cost you more than your time to buy it. That's the idea of time value of money. It takes you a certain amount of time to earn it. When you think about that, you may not see your stuff the same way at all.

Here's another way to look at it. You want a new iPod. The one you want is $269.99 plus tax. Using our $10 per….

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Value of Money

That the value of money changes with time is a matter of simple understanding. For example, the value of a dollar in 1920 is not the same at the value of a dollar today. In 1920 the dollar bought many more goods and services compared to what it does today. While the time value of money is very important to an investor, whether individual or broker, it is even more important to companies and organizations in the present environment of cost saving and profit generation.

Project financing and cost planning are important factors when finance planning for long-term projects, industrial projects and government projects.

Long-term projects can be financed using a number of options such as commercial debt (bank loans) or bonds. (Investopedia, 2003) For the company receiving payments for long-term projects factoring in the increased cost of labor (increments and salary raises), the cost of utilities (rising cost….

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Finance

Time Value of Money; Assessing the Value of a Starbucks Bond

The concept of the future value of money and the present value of money are useful when assessing potential investments. The future value of an investment is the value that the investor will expect to receive at some point in the future. If an investor is considering purchasing a Starbucks bond which will pay one $2,000 in a year's time, this is the future value of the bond. As investment takes place with the aim of making money and creating value for the investor they would be unwilling to pay $2,000 today for that bond, as this would not result in a profit. Instead, the investor will need to consider the price they are will to pay today in order to receive the $2,000 from Starbucks after a year, allowing for the passage of time. This is an assessment of….

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Future Value

The time value of money is a financial concept that relates to the earning power of money. hen money is held over a period of time, it can be invested so that the value of that money grows. This can be interest earned in a bank account, or earnings from investments. Similarly, the value of money that is not earning will erode over time, because of inflation that weakens the purchasing power of money. Thus, financial managers will take these factors into account when calculating cash flows -- money in the future is not worth as much as money today (Investopedia, 2013).

The time value of money therefore reflects two key variables -- time and interest. The interest or discount rate is the prevailing rate of interest in the economy, or for the company. This combines with time to increase or decrease the value of money. For financial managers and….

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Value of Money

An adage maintains the "time is money," and the time value of money is often considered a cornerstone of finance. This paper provides an example of how the author has used the time value of money in personal finance in the past. Finally, an analysis concerning how senior management might utilize time value of money principles in guiding a firm is followed by a summary of the research and important findings concerning the time value of money in the conclusion.

During my summer vacation months when I was a junior in high school, one of my major objectives was to save enough money to buy a decent used car before starting my senior year while still allowing enough disposable income to have a modest amount of fun as well. This process was complicated by the fact that my earnings were also modest and there was significant pressure on….

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Based on lifetime value, the firm can try to increase it from 3 to 5 purchases a year and still retain its customers. This can be done by offering new products and also attracting new customers to the shop with greater lifetime value.

Offering new products:

By offering new products and better deals, the company can increase frequency of purchase from its existing customer base. If an average regular customer increases his purchases by even one single purchase, this would give them this firm an additional $9,000 more from each customer. Translated into the monetary benefits over a lifetime of each and every customer, this single increase might prove beneficial for the firm.

Attracting younger customers:

This is often a strategy used by many corporations. When they feel that they need to increase customer lifetime value, instead of offering newer products alone, they also try to attract the younger crowd because of their longer….

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Value of Money

My SLP company is Wal-Mart. For me I would pay less than $100,000 for this bond, because I know that the $100,000 face value of the bond is not going to have the same purchasing power in a year as it does today. The value of the bond will therefore be less than $100,000, based on the prevailing interest rate. Wal-Mart is a company with a high amount of cash flow that is quite reliable. Thus it is not expected that Wal-Mart would pay much in the way of interest, maybe 2% per year. This implies the value of the bond would be around $98,000.

The discount rate for this bond, based on a $98,000 price, would be 2.04%, as calculated by ($100,000 -- 98,000) / 98000. This reflects the return that the bond offers to the investor.

Target is a company in the same industry as Wal-Mart. I….

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Value of Money

I would define the time value of money as the value of what that money could be earning between the present day and the future time that one could have the same amount of money. In addition to the financial earnings, I would factor in opportunity costs to my calculation of the time value of money, because it is important to consider what opportunities, not simply earning opportunities but general opportunities, one would miss by not having that money available in the present time. In other words, the time value of money is what one will have to make in the future to replace the money that is missing now combined with the opportunities lost in the interim.

It is critical for financial managers to understand the concept of the time value of money, because it is the whole concept behind financial planning. Many people who seek out….

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Value

PV = $15,000 / (1+.07)^1 = $14,018.69.

At 4%, this is $15,000 / (1.04) = $14,423.08

The PV of Account A is 6500 / 1.06 = $6,132.07. The PV of Account B. is 12,600 / (1.06)^2 = $11,213.96

Income

PV

NPV

The present value of the entire income stream is $168,459,500.

Income

PV

NPV

Income

PV

NPV

hat this example shows is that the net present value of a future cash flow increases with a lower discount rate. The reason for this is that a lower discount rate means the less purchasing power of the future cash flow is diminished. So in this situation the gold mine is worth more at a 3% rate than a 5% rate, and both are worth more than at a 7% rate.

A. The project's NPV at a discount rate of 0% is $670,000

The project's NPV at a discount rate of 2% is $614,353

The project's NPV at a discount rate of 6% is $514,815

The project's NPV at….

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Although this does not necessarily have an immediate monetary translation, it shows that the individual will prefer to receive his money and dispose of them earlier rather than later on.

On the other hand, we can indeed see that the present value of money is greater if we can deposit the money received at time t0 to a simple deposit account, with a certain interest rate. We will expect that amount of money to gradually increase over time and to reach a higher value some time in the future. As we can see from this example, the time value of money does not only fluctuate, but actually increases from moment t0 to moment t1.

3. Does one always earn the yield to maturity on bonds? Explain.

Not necessarily. In order to best explain this, we need to further clarify the concept of yield to maturity on bonds. The final yield to maturity….

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value of money is perhaps the most critical concept in modern financial theory. According to Bianco & Poole (2010), "While executives and academics often disagree, they all agree that the time value of money (TVM) is the most important finance concept that should be taught in introductory finance classes" (Gup, 1994) Undergraduate business students are typically exposed to time value of money concepts in more than one course. Introductory accounting and financial management courses always cover TVM. Students are often taught this subject in mathematics and other general business courses. Many techniques are utilized for teaching and solving TVM problems including formulas, tables, financial calculators and spreadsheets." (Bianco, Poole, 2010)

In my opinion, the idea for TVM is important due to the notion that a dollar invested today increase the value of dollars earned today due to the value of receiving P + i, which is principal plus interest. According….

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It is worth noting that after three years, another machine will need to be purchased. This cost should be included (i.e. The costs for years 4 and 5) in order to adequately assess the full cost difference between the two machines. After three years, Machine 2 still has a worse NPV than does Machine a, which implies to that point that Machine a is still better. The future decision after Year 3, because it is unknown at this point, cannot be included in the calculation.

b) NPV analysis supports the answer to question a. Indeed, NPV analysis is how the answer to question a was derived. With an interest rate to work with, NPV is the most appropriate means of determining the value of each of these projects, so it is what was used. Any other method of calculating question a would be inferior, so would not make sense.

11. For….

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3. Future Value (of an investment)

The future value of money is the amount that it will grow to after a specified time in the future. In the previous example, the future value of $10,000 after 1 year is $10,450. In the 2nd year, the future value is $10,920.25. In the 3rd year, the future value is $11,411.66. Let's say we want to get $10,000 after 3 years (future value). Assuming that the interest rate is still 4.5%, the money that we should have right now (present value) should be $8,762.97. We can see this in the following computations:

After 1st year: $8,762.97 + 4.5% = $9,157.30

After 2nd year: $9,157.30 + 4.5% = $9,569.38

After 3rd year: $9,569.38 + 4.5% = $10,000

This further illustrates the fact that the same $10,000 in the future (3 years from now) is only worth $8,762.97 in the present (Croome 2003).

4. Opportunity cost

Opportunity cost is the economic value….

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Project Management (Business)

eturn on Investment is applicable to decision making by the management by making use of projected proceeds in addition to the time value of money. The weighed up total cost of the project over the five-year time period of its life cycle $20 million. The intent of the organization is the plan to borrow this full amount and from then on recompense the debt every year in 5-year period at an annual compound interest rate of 10%. The future value of the loan amount taken by the organization at the end of the five-year period will be $32,210,200. Therefore, this implies that the minimum amount that the organization has to generate is $6,442,040 in order to recompense for the loan amount borrowed.

Project Overview

The bid proposal made by the organization is for a project in which the business is engrossed in perhaps attaining a new contract. The appraised cost….

4 Pages

Economics

value of money reflects the fact that money diminishes in value over time. A dollar today has more buying power than a dollar tomorrow does. The time value…

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Economics

Value of Money A lot of people today think more about "stuff" than how much money it takes to buy that "stuff." Like a burger. It may be only…

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Economics

Value of Money That the value of money changes with time is a matter of simple understanding. For example, the value of a dollar in 1920 is not the…

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Economics

Finance Time Value of Money; Assessing the Value of a Starbucks Bond The concept of the future value of money and the present value of money are useful when assessing potential…

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Economics

Future Value The time value of money is a financial concept that relates to the earning power of money. hen money is held over a period of time, it can…

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Literature

Value of Money An adage maintains the "time is money," and the time value of money is often considered a cornerstone of finance. This paper provides an example of…

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Business

Based on lifetime value, the firm can try to increase it from 3 to 5 purchases a year and still retain its customers. This can be done by offering…

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Economics

Value of Money My SLP company is Wal-Mart. For me I would pay less than $100,000 for this bond, because I know that the $100,000 face value of the…

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Economics

Value of Money I would define the time value of money as the value of what that money could be earning between the present day and the future time…

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Economics

Value PV = $15,000 / (1+.07)^1 = $14,018.69. At 4%, this is $15,000 / (1.04) = $14,423.08 The PV of Account A is 6500 / 1.06 = $6,132.07. The PV of…

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Economics

Although this does not necessarily have an immediate monetary translation, it shows that the individual will prefer to receive his money and dispose of them earlier rather than…

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Economics

value of money is perhaps the most critical concept in modern financial theory. According to Bianco & Poole (2010), "While executives and academics often disagree, they all agree…

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Economics

It is worth noting that after three years, another machine will need to be purchased. This cost should be included (i.e. The costs for years 4 and 5)…

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Economics

3. Future Value (of an investment) The future value of money is the amount that it will grow to after a specified time in the future. In the previous example,…

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Transportation

Project Management (Business) eturn on Investment is applicable to decision making by the management by making use of projected proceeds in addition to the time value of money. The weighed…

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