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Understanding Time Value of Money

This document discusses the concept of time value of money in finance and business administration. It defines time value of money as calculating the value of money based on time and explains how the value of money today is different than the value of money in the future. It notes that cash flow today is more valuable than in the future due to factors like inflation, consumption preferences, and positive interest rates. The document provides examples of how time value of money is important for investors, companies, and individuals in making financial decisions.

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43 views21 pages

Understanding Time Value of Money

This document discusses the concept of time value of money in finance and business administration. It defines time value of money as calculating the value of money based on time and explains how the value of money today is different than the value of money in the future. It notes that cash flow today is more valuable than in the future due to factors like inflation, consumption preferences, and positive interest rates. The document provides examples of how time value of money is important for investors, companies, and individuals in making financial decisions.

Uploaded by

dinira gita
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

FINANCE

MANAGEME
NTBUSINESS ADMINISTRATION
CLASS RULES
TIME VALUE OF
MONEY
A. Reski Almaida Dg Macenning,
M.M.
LEARNING OUTCOMES

Responsibility

Explain time value of Compute the present


money concepts value of money

Compute the future Compute present and


value of money future value of annuities
TOPIC
The Definition of Time
Value of Money

The Importance of
Time Value of Money

Factors Affecting of
Time Value of Money
THE TIME
VALUE OF
MONEY
TODA NEXT
Y YEAR
credit: IDN Times, 2020
Inflation is the decline of purchasing
power of a given currency over time.

credit : [Link]
credit : kompas TV
Time value of money is a concept
of calculating the value of money
based on time
Time Preference of Money

Cash flow today is more valuable than in the future

Inflation Reason Consumption Reason


The Importance of Time Value of Money

Investor
Making investment decisions, taking into account inflation,
interest rates, risks and returns.

Company
Preparing a budget that will affect cash flow adjustments

Individual
Making target decisions in investing or saving and setting targets
for retirement funds
credit: [Link]
Point of Interest

The value of money today will be


different from the value of money
in the future

The value of money today will be


valuable than the value of money
in the future
STUDENT
ATTENDANCE

[Link]/presensimankeu
Exercise

XExplain why this statement is true: “A dollar in


hand today is worth more than a dollar to be
received next year, assuming interest rates are
positive.”

Y [Link]/evaluasiTVM
Inference

Difference is recognized and


accounted by Time Value of Money

Cash flow today is more


valuable than in the future.
Resources

F. Brigham, Eugene F and Michael C. Ehrhardt. 2005. Financial Management


Theory and Practice 12st Edition. Thomson Soutwest.

James C. Van Horne and John M. Machowics, Jr. 2008. Fundamental of


Financial Management, 13rd edition. Pearson.
Future value of
money

Annuity

Present value of
money
THANK YOU &
SEE YOU NEXT
WEEK

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