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 Why understanding of time value of money is important?

What you are saying is one of the application of time value ofmoney. What is the concept? 


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The time value of money (TVM) is the concept that money available at the present time is worth more than the identical sum in the future due to its earning capacity (Drake & Fabozzi, 2009). Almost everything in life involves the time value of money. If you buy a car on credit, take out a mortgage, or invest in stocks. It all involves the time value of money. If you work for a company, every decision the company makes will involve, in one way or another, the time value of money. If you are trying to determine whether or not to pursue a company project, the time value of money will weigh on your decision. Moreover, by understanding the time value of money help to identify misconceptions about real cost and benefits of the project. When making a budget decision understanding the value of money is important because it allows a business owner to adjust cash flow for the passage of time.

References

Drake, P. P., & Fabozzi, F. J. (2009). Foundations and applications of the time value of money    (Vol. 179). John Wiley & Sons.

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