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Why is the time value of money so important in capital budgeting decisions?

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Why is the time value of money so important in capital budgeting decisions?

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Solution Summary

This discusses the concept of time value of money and its application in capital budgeting decisions in 316 words.

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Why is the time value of money so important in capital budgeting decisions?
The investment decisions of a firm are generally known as the capital budgeting, or capital expenditure decisions. The firm's investment decisions would generally include expansion, acquisition, modernisation and replacement of the long-term assets. Sale of a division or business (divestment) is also as an investment decision.

Importance of Time value of money
Time literally is money - the value of the money you have now is not the same as it will be in the future and vice versa. It ...

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