Question

Give one example of how in business that the time value of money concepts will be important. Give one examples for your personal life. In your examples use dollar estimates to show the impact

Answer 1

Time value is a very important concept for business, because money changes its value over time. e.g. things that we can buy today in $1, we will not be able to buy same quantity in $1 after 10 years. Or we can say that money today is worth more than the same quantity of money in future.
We can understand the importance of time value in business by following example:

Suppose business is thinking purchasing a new production machinery, which will cost $10,000, and it will generate $1,200 a year in net cash flow for 10 years, for a total of $12,000. On the face of it, the project looks like a profitable, but that's before taking into account time value. Now say you'd borrow the money for the project at 5 percent annual interest, with the loan repayable over 10 years and $1295 is to be paid annually. To be worthwhile, the project must not only pay back its upfront cost but also cover the interest on the loan. So you'd use 5% as your discount rate. At that discount rate, the combined present value of those cash flows is about $7,300. As we can see after taking time value into account project will not be able to recover interest on the loan.
Hence machinery is not at all profitable.

In your personal life, time value of money plays a very important role in taking decisions regarding, loan repayment, borrowings, retirement decisions, savings etc.
Assume, for example, that you want to guarantee you'll receive $2,000 each month after your retirement. You decide that you want a investment, so you choose to invest money into a fixed deposit that will make payments each month to you for the rest of your life once you retire.
Assume your deposit grows at a rate of 3.5 percent annually.
You would need to deposit $400,667 today (present value) in exchange for the security of your $2,000 monthly payment for life. And that's how you can anticipate you'll live a long happy life.