TOPIC: Why is the concept of time value of money and the discounted cash flow valuation...

TOPIC:

Why is the concept of time value of money and the discounted cash flow valuation so important to financial managers, corporations, and many other users of these concepts?

Expert Solution

The time value of money is an important concept in finance. This concept focuses on the fact that money earned today has a greater value than money earned in the future. This will depend on the opportunity cost of capital. Managers and corporations as well as investors consider the time value of money for making decisions such as Capital Investments, return on investment and retirement planning. Capital Investments for example require huge amounts of funds which remain locked for a long period of time. More over businesses are faced with different options and they need to choose the correct option which will give them a higher return. For this purpose they use time value concepts to analyze different options by comparing the present value of cash flows associated with these options. Similarly investors use the time value concept to analyze the different investment options and select the one which gives them the greater future value.

jeff jeffy answered 7 months ago

The concept of time value of money refers to the timing of a cash flow does...

The concept of time value of money refers to the timing of a cash flow does not matter the fact that most people prefer money later, rather than earlier the timing of a cash flow matters cash flows can be compared directly even if they occur at different times

Describe how the concept of the time value of money is incorporated into the valuation of...

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Time Value of Money, Bonds Risk and Valuation a) Provide a detailed description of the topic....

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You have been asked by an investor to value a restaurant using discounted cash flow valuation....

You have been asked by an investor to value a restaurant using discounted cash flow valuation. For the current year, the restaurant earned pretax operating income of $750,000. Income has grown 2% annually during the last five years, and is expected to continue growing at that rate for the next two years. Net operating working capital increased by $60,000 during the current year and current year capital spending on long-lived assets exceeded depreciation by $75,000. Both working capital and the...

Time Value of Money and Bond Valuation" Please respond to the following: Examine the concept of...

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TOPIC: Why is the concept of time value of money and the discounted cash flow valuation...

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