Present and Future Values

Debra Johnson

BUS 401 Principles of Finance

Instructor: Bradley Simon

Present and Future Values

The concepts of present and future value are based on the time value of money. Time value of money is a vital concept in financial management. Used to link investment opportunities and to offer solutions to several financial opportunities or issues, the concepts of compound annual growth and the time value of money are widely used in all aspects of business and economics. The time value of money is that fact that the dollar received in the future is worth less than a dollar in hand today. Cash flows occurring in different periods must be adjusted to their values at a common point in time to be analyzed and compared.

A. Present Value

Present value is the...