The University of Phoenix simulation “Utilizing the Time Value of Money” focused on the financial principles used to evaluate and determine whether to outsource manufacturing or to invest in in-house operations. The simulation depicted real-life examples of how investment choices impacts the Net present value (NPV), internal rate of return (IRR), and cost of capital. The objective of the simulation was to apply time value of money principles to evaluate the investment alternatives of Cracker Pop. In each of the simulation’s scenarios, net present value and internal rate of return were used to determine the optimal choice pertaining to outsourcing or investing in a new plant for its card operations. Outsourced production issues arose in the second scenario introducing debt-equity mix in the evaluations. A drop in long-term interest rates made it more lucrative for InnoVista to invest in an additional plant with a debt-equity mix of 60% - 40%. The third scenario involved evaluating the criterion to increase production. Maintaining the same debt-equity mix as the second scenario, upping manufacturing to 900,000 units, and adding an additional shift proved to be the most optimal approach for InnoVista to meet consumer demands for its Cracker Pop cards as it resulted in a low cost per capital while also producing a high NPV. Aside from NPV and IRR, companies also use the payback period to evaluate possible investments. The payback period estimates the length of time required to recover the cost of an investment and addresses how desirable an investment is over the long-term. The payback method does have disadvantages in that it ignores time value of money principles and fails to recognize the profitability and risk of an investment. “Because of these reasons, other methods of capital budgeting like net present value and internal rate of return are generally preferred” (Answers Corporation, 2007). Although net present value (NPV) is a preferred criterion in...

... This article will explain the financial concept of timevalue of money. The overview provides an introduction to the principles at work when money grows in value over time. These principles include future value of money, present value of money, simple interest and compound interest. In addition, other concepts that relate to factors that can impede the growth in value of money over time are explained, including risk, inflation and accessibility of assets. Basic formulas and tables have been provided to assist in calculating various formulations of timevalue of money problems. Explanations of common financial dealings in which the timevalue of money is an important consideration, such as annuities, loan amortization and tax deferral options, are included to help illustrate the concept of the timevalue of money in everyday life.
The timevalue of money is a fundamental financial principle. Its basic premise is that money gains value over time. As a result, a dollar saved today will be worth more in the future, and a dollar paid today costs more than a dollar paid later in...

...TIMEVALUE OF MONEYTimevalue of money is useful in making informed business decisions. For example the "net present value method" can be used to help decide the best alternative among multiple alternative uses of a firm or personal financial resources. By discounting various alternatives to their "present value" one can compare the alternatives. Timevalue of money can also answer such questions as what one's investment will be worth at a certain point of time in the future, assuming a certain interest rate. Timevalue of money can also be used to compute such useful information as car, mortgage and other loan payments. Another use of timevalue of money in accounting is reporting of certain long-term assets and liabilities.
Timevalue of money is based on the principle of compound interest. Each time there is a compounding period the new principal is increased by the interest from the previous period.
Converting Before Using the Tables
When using the tables, you may need to convert if, for example, in a lump sum situation there are more than one compounding periods in a year. Or you may need to convert (to monthly compounding) if, for...

...Material
TimeValue of Money
Resource: Ch. 12, 12-A, & 12-C of Health Care Finance
Part I: Complete the following table by inserting your responses to the questions. Cite any sources you use.
|Define the timevalue of money. |The timevalue of money is the value of money figuring in a given amount of interest earned over a given |
| |amount of time. The timevalue of money is the central concept in finance theory. The value of a dollar today|
| |is more than the value of a dollar in the future: thus the “present value” terminology. Furthermore, the |
| |further in the future the receipt of your dollar occurs, the less it is worth. |
|Provide a real-world example for the time |For example, $100 of today's money invested for one year in a stock in McDonalds can earn 5% interest will be|
|value of money. |worth $105 after one year. Therefore, $100 paid now or $105 paid exactly one year from now both have the same|
|...

...The Basic Law in Finance TimeValue of Money
We earn money to spend it and we save money to spend it in the future. However, for most people spending money in the present time is more desirable since the future is unknown. We can gratify the desire to spend money today rather than in the future by knowing the basic law in finance timevalue of money. This means that a dollar today is worth more than a dollar at some time in the future. Unfortunately, people very often want to buy things at the present time which cost more that what they earn, so they pay with credit cards or take out loans which have to be paid off at some point in the future. In this paper we will discuss the present value of money, the future value of money, compounding effect of money, and annuities. Knowledge of this basic timevalue of money principles and calculations is crucial for making sound financial decisions in business as well as in our personal lives.
Looking at the borrowing transaction from the borrower's perspective, there are consumers and businesses (not to mention the deficit-ridden government) who really need that dollar today and who are willing to promise to pay back more than that...

...TimeValue of Money
The timevalue of money serves as the foundation for all other notions in finance. It affects business finance, consumer finance and government finance. Timevalue of money results from the concept of interest. The idea is that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. Timevalue of money can be illustrated by the fact that a dollar received today is worth more than a dollar received a year from now because today's dollar can be invested and earn interest as the year elapses. Implicit in any consideration of timevalue of money are the rate of interest and the period of compounding. This paper will list various financial applications of the timevalue of money and explain the components of the discount/interest rate.
TimeValue of Money
The present value of a certain amount of money is greater than the present value of the right to receive the same...

...TimeValue of Money (TVM), developed by Leonardo Fibonacci in 1202, is an important concept in financial management. It can be used to compare investment alternatives and to solve problems involving loans, mortgages, leases, savings, and annuities.
TVM is based on the concept that a dollar today is worth more than a dollar in the future. That is mainly because money held today can be invested and earn interest.
A key concept of TVM is that a single sum of money or a series of equal, evenly-spaced payments or receipts promised in the future can be converted to an equivalent value today. Conversely, one can determine the value to which a single sum or a series of future payments will grow to at some future date.
The timevalue of money serves as the foundation for all other notions in finance. It impacts business finance, consumer finance and government finance. Timevalue of money results from the concept of interest.
Key Components of TimeValue of Money
Present Value is an amount today that is equivalent to a future payment, or series of payments, that has been discounted by an appropriate interest rate. The future amount can be a single sum that will be received at the end of the last period, as a...

...
TimeValue Of Money
Rawand Ibrahim
Florida State College At Jacksonville
Dr. Daniel J. Mashevsky
FIN4501-Investment Management
Table of Contents
Introduction 2
Components of interest rate 3
Stocks and Bonds 4
Interest rate 4
Future Value 5
Determining Present Value 6
Conclusion 6
Reference: 7
Introduction
What is the timevalue of money? (Campbell Harvey, 2012) “Timevalue of money is initially defined as the concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity. In other words, the idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received”. In this paper we will discover what it means when people refer to time being money by learning to calculate the value of the present dollar as well as the value of the future dollar. Later, with examples, we will continue to find out exactly why interest is the foundation of timevalue of money.
Components of interest rate
(Business Dictionary, 2015) “A capital market is a financial market that works as a passage for...

...Head: TIMEVALUE OF MONEYTimeValue of Money
Team C:
University of Phoenix
MBA 503: Introduction to Finance and Accounting
Timevalue of money is the concept that an amount of money in one's possession is worth more than that same amount of money promised in the future (Garrison, 2006). Today money can be invested to earn interest and therefore will be worth more in the future (Brealey, Myers, & Marcus, 2004). This paper will explain how annuities affect timevalue of money (TVM) and investment outcomes. In addition, this paper will briefly address the impact of discount and interest rates, present value, future value, opportunity cost and the impact interest has on money being borrowed.
TimeValue of Money
Present Value is an amount today that is equivalent to a future payment or series of payments that has been discounted by an appropriate interest rate. The future amount can be a single sum that will be received at the end of the last period, as a series of equally spaced payments (an annuity), or both. Since money has timevalue, the present value of a promised future amount is worth less...

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