FIN 010 Lecture Notes - Lecture 6: Cash Flow, Net Present Value

8 views2 pages
School
Department
Course
Professor

Document Summary

Time value of money, one of finance"s most important instruments, is regularly used in financial analysis and decision-making. In this section we are considering current value and potential value, the cornerstones of money time worth. The value of money is affected by competing forces: its value, as a result of inflation risk and liquidity preferences, decreases over time, but may increase as a result of interest rates. Inflation erodes the buying power of money over time: each dollar or pound buys less as the prices increase. Likewise, attitudes around liquidity indicate that companies tend to keep cash to accommodate unexpected payments. That is, organisations tend to have cash on hand so that it can be spent or used for emergency purposes instantly in successful endeavours. A premium has to be charged to persuade these entities to move into more uncertain (longer-term) properties. When interest rates are favorable, the amount of money invested today in the future would be worth more.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents