Question

Find an article relating to Time Value of Money or Asset Valuation techniques from any medium, briefly summarize the article, explain how you found the article particularly useful or timely, and give your personal reactions to the article. Be sure to provide the title of the article, the author(s), and the reference for the article.

Answer 1

The article talks about the concept of time value of money and states the basic tenet of time value of money that money received today is more valuable than the money that will be received in future. This is because the money can be invested and can earn interest. The time value of money is nothing but a principle that takes into account the fact that an opportunity cost is attached to money and hence money is always worth more today than tomorrow.

The article is highly useful as it helped to understand the concept of opportunity costs associated with money. Using this concept I am now able to easily comprehend the capital budgeting problems and how to solve them using different tools like NPV analysis (net present value), IRR analysis (Internal Rate of Return) etc. I am also able to differentiate between cash flows occurring between a period of time and point in time.

My personal reaction to the article is that the article is comprehensive in nature and covers the concept of time value of money in full detail. It makes use of illustrations as well and hence is easy to understand as well. All in all my personal reaction to the article is a positive one and I found the article to be highly useful.

Title of the article: What Is the Time Value of Money and Why Does It Matter?

Author: Michelle Rama – Poccia

Reference: https://www.thestreet.com/personal-finance/education/time-value-of-money-14796679