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Time Value of Money

What is the "time value of money" and how does it affect a financial manager's decision regarding cash flows?

What is an annuity? Why might annuities be useful to a corporation?

In computing the cost of capital, do we use the historical costs of existing debt and equity or the current costs as determined in the market? Why?

How is valuation of any financial asset related to future cash flows? Give at least 1 example.

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"Time is money" is an old adage that carries a significant amount of weight. When we equate time with money we do so because we know that without time, money cannot grow, but we also understand that money cannot be made if time is idle or wasted, and as such money can also decrease in value over time. Thus, it's important for both investors and financial institutions to be cautious and to scrutinize the essence of financial operations over the duration of their livelihood (or demise).

Time Value of Money (TVM) according to Business Dictionary.com is "the price put on the time an investor or lender has to wait until the investment or loan is fully recouped. Time Value of Money (TVM) is based on the ...

Solution Summary

Explains the time value of money concept and also describes the time value of annuities, cost of capital and valuation of an asset.