Discuss in detail with an example why a Dollar today is worth more than a dollar in the future?

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#. Future Value

This term refers to the value of a cash flow (or series of them) at some specific future time. Any cash flow that is scheduled to occur sometime later than today is referred to as a "future value." Literally translated, future value means "what will it be worth at some future point in time?" For example, if an investment promises to pay $100 one year from now, then the $100 is the future value of the investment because that investment will be worth $100 at that point in time.

The time value of money means your dollar today is worth more than your dollar tomorrow because of inflation. Inflation increases prices over time and decreases your dollar's spending power.

A dollar in hand today is worth more than a dollar to be received in the future because if you had it now you could invest that dollar and earn interest.

Nightingale answered 2 years ago

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