What do you mean by time value of money, Financial Management

Assignment Help:

Q. What do you mean by Time value of money ?

The concept of TVM refers to the fact that the money received today is different in its worth from the money receivable at some other time in future. In other words, the same principle can be stated as that the money receivable in future is less valuable than the money received today. For example, if an individual is given an option to receive Rs. 1,000 today or to receive the same amount after one year, he will definitely choose to receive the amount today (of course he is presumed to be a rational being). The obvious reason for this reference for receiving the money today is that the rupee received today has a higher value than the rupee receivable in future. This preference for current money as against future money is known as the time preference for money or simply TVM.

This concept of TVM is applicable in equal strength to individuals as well as to the business firms. In case of most of the decision particularly those taken by a firm, the financial implications may occur over a period of time and quite often over a long period of time even up to ten years or more. Therefore, TVM becomes an important consideration for any financial decision.


Related Discussions:- What do you mean by time value of money

SES, Scenario: You are still a consultant for the Excellent Consulting Grou...

Scenario: You are still a consultant for the Excellent Consulting Group. You have completed the first assignment, developing and testing a forecasting method based on linear regres

Explain the political risk related with making fdi, What factors would you ...

What factors would you consider in evaluating the political risk related with making FDI in a foreign country? Answer: Factors to be considered as follow: a) The host countr

Agency problem, Discuss how a business might limit agency problem between m...

Discuss how a business might limit agency problem between management and creditors

What is risk mitigation and how it is monitored, Q. What is Risk mitigation...

Q. What is Risk mitigation and how it is monitored? 1. When managing risks, there are several risk strategy options to be considered. Risk may be avoided entirely, transferred

Cash flow of reverse convertibles, (a) Let's presume that the firm may defa...

(a) Let's presume that the firm may default only on last coupon payment date and that when this take place stock price would be less than some predetermined price K at the expira

"a" round financing, "A" Round Financing "A" Round Financing is the fir...

"A" Round Financing "A" Round Financing is the first main round of business financing through private equity investors or venture capitalists. In private equity investing, an "

HOW TO MANAGE FINANCES?, What are the strategies in managing your finances?...

What are the strategies in managing your finances? How it should be monitor?

Describe about accountants report, Q. Describe about Accountants Report? ...

Q. Describe about Accountants Report? Accountants' Report - Formal document which communicates an independent accountant's: (1) expression of limited assurance on FINANCIA

What interest rate is required to yield a balance, Q.  A sum of $2,500 is d...

Q.  A sum of $2,500 is deposited in a bank account that pays 5.25% interest compounded weekly. How long will it take for the deposit to double?  How long will it take you to accrue

Walter''s dividend model, explain the assumptions underlying Walter''s divi...

explain the assumptions underlying Walter''s dividend model?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd