(1ST SLIDE)

> COVER PAGE

Good day everyone! Can you confirm if my audio is clear by giving us a thumbs up?
How about our presentation? Kindly give us heart reacts if you can see it na on your
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We all probably have heard about the Time Value of Money and so we are here to
provide profound discussion regarding this. It’s obvious that Time Value is applied to
an entity’s financial and management undertakings; however, do you know that it is
also applicable in our personal lives? Who among here has never tried saving
money? I assume none. Diba, kapag nag iipon tayo, say we plan on going out with
our friends or lovers next month. What we do is we save money from our daily
allowance para may pera tayong mahahawakan sa galaan next month. The concept
of Time Value enters here when we compute; magkano ang ating goal budget at
magkano ang kailangan nating isave starting now to reach that specific amount.

(2ND SLIDE)

I. ROLE OF TIME VALUE IN FINANCE

“Cash that comes in the future is worth less than the cash that firms spend upfront”

According to Gitman, this chapter gives the idea that the cash that comes in the
future is worth less than the cash that firms spend upfront. Then enters the Time
Value of Money to introduce the tools that are vital in comparing cash inflows and
outflows that occur at different times.

(3rd SLIDE)

“FUTURE VALUE VERSUS PRESENT VALUE”

Scenario: The Angat Buhay Company spent $15,000 today on an investment that is expected to
generate a total income of $17,000 over the next 5 years.

*To compare cash today versus cash in the future, ask:

- What amount of money in the future is equivalent to $15,000 today? (FV of 15,000)
- What amount today is equivalent to $17,000 paid out over the next 5 years? (PV of incoming cash
flows)

To visualize the difference between the Future and Present Value, let’s apply the
scenario kanina to a larger scale. The scene is that the Angat Buhay Company
spent $15,000 today on an investment that is expected to generate a total income of
$17,000 over the next 5 years. Of course, even with that expectation we really
cannot tell if that inflow is enough to justify their initial investment; hence, the
manager needs a way to compare cash today versus the cash in the future.
There are two approaches to achieve this comparison. The first one is to ask, “What
amount of money in the future is equivalent to $15,000 today?” or what is the Future
Value of 15,000? And the other one is to ask “What amount today is equivalent to
$17,000 paid out over the next 5 years?” or what is the Present Value of incoming
cashflows?

(4th SLIDE)

>insert: image name: timeline

TIME LINE
- A horizontal line that depicts investment cash flows.
- Negative Values: Cash Outflows ; Positive Values: Cash Inflows

So, on the previous slide, I’ve mentioned the inflows and outflows. Some may ask,
what are they and where did they come from. Basically, Cash inflows are money that
goes into the business. Meanwhile, Cash outlows are those that leave the business.
Using the same example kanina sa Angat Buhay Company, the table here exhibits
the movement of cash. There’s our investment worth 15,000. In year 1, we receive
3,000. In year 2, we receive 5,000 and so on that if we combine from year 1 to year
5, we’ll have a total of $17,000.

The horizontal line that you see underneath the table that can be used to depict the
investment cash flows is called a TIME LINE. If we look closely, we’ll notice na the
line consists of the amounts written in the table, one of the most obvious difference
lang is the application of positive and negative values to indicate cash inflows and
outflows. So yeah, inflows po yung mga positive, while outflows naman yung
negative.

(5th SLIDE)

>insert: image name: comp-disc

Managers need to compare cash flows at a SINGLE point in time (end or beginning)
-FV technique uses COMPOUNDING to find the FV of each cash flow at the END of investment life.
-PV technique uses DISCOUNTING to find the PV of each cash flow at time zero (BEGINNING).

Balik tayo doon sa comparing cash flows na pinag uusapan natin kanina. In making
decisions kasi, managers need to compare cashflows at a single point in time -may
be at the beginning or end. The Future Value technique uses COMPOUNDING to
find the Future Value of each cash flow at the END of investment life. The Present
Value technique, on the other hand, uses DISCOUNTING to find the Present Value
of each cash flow at time zero (BEGINNING). Kindly analyze na lang po this image
for a better and simpler understanding.
(5th SLIDE)

COMPUTATIONAL TOOLS
1. Financial Calculators
- includes numerous preprogrammed financial routines.
>insert: image name: fin-calc

2. Electronic Spreadsheets
-also have a built-in routine that simplify time value calculations.
-value for each variable is entered in a cell, and the calculation is programmed using an equation that
links the individual cells.

Next, this slide presents two computational tools that are used for the time value of
money calculations. The first tool is the Financial Calculator which includes
numerous preprogrammed financial routines. What makes this instrument unique
are the keys -like those that are displayed in the image. I won’t be discussing this
anymore since mapapasadahan naman ito ng next reporters mamaya. I’ll just ask
you guys to save or take note of these symbols.
The second tool is called Electronic Spreadsheets. This may be a bit similar to a
financial calculator in the way that they both have built-in routines that simplify time
value calculations. The major distinctions of this tool are that the value for each
variable needs to be entered into a cell in the spreadsheet and that the calculation is
programmed using an equation that links the individual cells.

Personally, if you’re gonna ask me, which is more convenient to use, id answer the
electronic spreadsheets. But regardless of our preference, we must take note that
above all else, knowing the formulas is still the most important. So here’s the next
reporter to present these methods.