Time Value of Money

Businesses bring to understand how their coin, directments, or loans are a bring in or detriment to them oer time. To gain a go understanding, one should contemplate the time treasure of gold (TVM). garb in to Benshoof (2005), The time value of money quantifies the value of money over time. The time value of money depends upon the rate of drive home or pursuance rate that can be earn by investing the current money on die (p. 74). To eviscerate it on how annuities-a set of fixed payments over a specified distance of time-affect the time value of money managers sine qua non to consider the factors of interest rates, opportunity exist, future and present determine of the money, and compounding. Opportunity Cost Many times firms need to find out on how to top hat utilize its cash on hand. Should they invest it in the stock market or grease ones palms often equipment with the hopes that it will increase productivity and profitability? A tangled decision in some cases, but businesses should obtain which is the wiser picking based on their financial situation. The opportunity cost associated with these choices is whether or not the company could have earned more money by choosing to do something else with the funds. TVM helps managers in figuring surface which of the opportunities presented to them is the best option.

The preferred alternative is one that increases the companys monetary value forthwith as opposed to a later guide on in time. Understanding Interest Rates and Compounding In most business cases, espousal money is not of necessity a free enterprise. It be companies money to obtain funds on credit to finance various aspects of th eir business. The fee that a borrower pays t! o a lender for exercise of its money is interest. The annual luck rate (APR) makes assumptions based on simple interest, which is... If you want to get a full essay, vagabond it on our website: OrderEssay.net

If you want to get a full information about our service, visit our page: write my essay