BUS 401 Week 2 Journal Present and Future Values, and Expected Returns
The concepts of present and future value are based on the time value of money. Time value of money is a crucial concept in financial management of businesses. It is used to compare investment opportunities and offer solutions to issues involving loans, leases, saving, mortgages and annuities. The concept of compound 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.