Time Value of Money (TVM)
. Introduction to Time Value of Money (TVM) Definition: TVM is the concept that money available today is worth more than the same amount in the future due to its potential earning capacity. Basis: TVM is based on the idea that money can earn interest or returns. Real-World Example: If you receive Rs. 100,000 today and invest it at 10%, after one year it becomes Rs. 110,000. Thus, receiving money today is more valuable. 2. Importance and Applications Investment Analysis Capital Budgeting Loan Amortization Retirement Planning Business Valuation 3. Advantages of TVM Helps in comparing investment opportunities Assists in making informed decisions Useful in financial planning and forecasting Disadvantages Assumes constant interest rates Inflation and risk factors may not be fully considered 4. Concepts Related to TVM a. Future Value (FV): Future Value (...