Time Value of Money
Learn about the time value of money and how to determine the present and future value of cash flows. Discover capital budgeting techniques for investment decisions. Ideal for college students and finance professionals.
What you’ll learn
- Time value of money
- Present and future value of a single cash flow
- Present and future value of annuities and other various cash flow streams
- Loan Amortization
Suppose you have the option of receiving $1 today vs. $2 tomorrow. Which option would you choose? How would you determine which is the better deal? Some of us would rather have less money today vs. wait for more money tomorrow. However, sometimes it pays to wait. This course introduces the concept of time value of money and explains how to determine the value of money today vs. tomorrow by using tools to determine present and future values. This course also introduces the concept of interest rates and how to apply them when multiple periods are considered.
The capital budgeting section will show you how a financial manager makes capital investment decisions using financial tools that are presented in this course. It is especially the case that this unit addresses the concept of capital budgeting and how to evaluate investment projects using the net present value calculations, internal rate of return criteria, profitability index, and the payback period method. In particular, this unit will teach you how to determine which cash flows are relevant (should be considered) when making an investment decision.
Say for instance, you have been asked to give your recommendation about buying or not buying a new building. As the financial manager, it is your task to identify cash flows that, in some way or another, affect the value of the investment (in this case the building). Also, this unit explains how to calculate “incremental” cash flows when evaluating a new project, which can also be considered as the difference in future cash flows under two scenarios: when a new investment project is being considered and when it is not.
Who this course is for:
- College students and finance people
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