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Importance of the Time Value of Money Concept

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Why is the time value of money concept important in accounting?

Under what circumstances would we use the time value of money calculations?

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Solution Summary

315 words with references speak on the concept of time value of money in accounting, including topics like risk, preference for consumption and investment opportunities.

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Time preference for money is an individual's preference for possession of a given amount of money now, rather than the same amount at some future time.
three reasons may be attributed to the individual's time preference for money:
- risk
- preference for consumption
- investment opportunities

Two most common methods of adjusting cash flows for time value of money:
Compounding?the process of calculating future values of cash flows and
Discounting?the process of calculating present ...

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