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Chapter 5: Introduction To The Valuation - The Time Value of Money
Chapter 5: Introduction To The Valuation - The Time Value of Money
Time value of money: the fact that a dollar in hand today is worth more than a dollar promised at some time in the future.
As the length of time until payment grows, present value declines. For a given length of time, the higher the discount rate is, the lower is the present value. o Present value and discount rates inversely related.