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    Time value of money in decision making

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    Please help with the following problem.

    I need help in explaining why the time value of money is important in making economic decisions. Keeping to the basic of using to the two most common tools of Net Present Value and Pay period used in business to incorporate into the time value of money into operational decision making.

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    The time value of money is important in economic decisions because the value of money received today is more than the value of same money going to be received after one year. The money received sooner is preferred than later because if the money is received earlier, that money can be used to invest in some other securities/investment to earn interest/dividend. Therefore, the money received sooner will increase the wealth of the company. Therefore, it is important to incorporate time value of money in capital budgeting decisions. Further, the money will lose its ...

    Solution Summary

    This posting helps with a question regarding the time value of money in decision making. The explanation is given in 384 words with two references.