Term
| Future Value of Money (FV): |
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Definition
| The amount an investment is worth after one or more periods. |
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Term
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Definition
| The process of accumulating interest earned on an investment over tim, to earn more interest. |
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Term
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Definition
| Calculate the present value of some future amount. |
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Term
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Definition
| The rate used to calculate the present value of future cash flow. |
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Term
| Discounted Cash Flow Valuation (DCF): |
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Definition
| Calculating the present value of the future cash flow o determine its value today. |
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Term
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Definition
| The current value of future cash flows discounted at the appropriate discount |
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Term
| Time Value of Money (TVM): |
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Definition
| The increases in an amount of money as a result of interest earned is TVM. Savings or investing today instead of spending which will result in a future amount greater in that amount. |
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Term
| How does Time Value of Money (TMV) impact decisions a financial manager makes? |
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Definition
-Helps to sacrifice something for something else more desirable
-Helps to increase the amount of money as a result of interest earned
Every time you spend, save, invest or borrow for the firm you should consider the time value of that money as an opportunity cost. |
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