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Time Value of Money and Bottom Line

Why is Time Value of Money (TVM) important and how can it affect an organization's bottom line when utilized? Are you able to utilize this concept at home and how?

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Time Value of Money (TVM)

The basic idea behind the concept of time value of money is that a dollar received tomorrow is worth less than a dollar received today. Since, by postponing the receipt of a dollar today to a future date, we are postponing the opportunity to enjoy that dollar. Thus, the actual value of a dollar is constant but depreciates with time. The longer we wait to receive the dollar, the higher is the loss in the value of the dollar. This concept is known ...

Solution Summary

This solution of 351 words defines and discusses Time Value of Money (TVM) and how it affects the organizations bottom line when used. It also applies the concept to a home setting in terms of taking out a loan at a commercial bank.

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