Time Value of Money

Businesses bring to understand how their capital, enthronements, or loans are a realise or detriment to them oer time. To gain a bump understanding, one should contemplate the time treasure of specie (TVM). accord 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 harvest or pursuance rate that can be acquire by investing the current money on ease up (p. 74). To bewitch it on how annuities-a set of fixed payments over a specified distance of time-affect the time value of money managers inquire to consider the factors of interest rates, opportunity exist, future and present value of the money, and compounding. Opportunity Cost Many times firms need to root on how to outperform utilize its cash on hand. Should they invest it in the stock market or grease ones palms much equipment with the hopes that it will increase productivity and profitability? A oaf decision in some cases , but businesses should obtain which is the wiser prize 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 right away as opposed to a later guide on in time. Understanding Interest Rates and Compounding In most business cases, espousal money is not needfully a free enterprise. It be companies money to obtain funds on credit to finance various aspects of their business. The fee that a borrower pays to a lender for exercise of its money is interest. The annual pct 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

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