Applications of the Time Value of Money

Applications of the Time Value of Money

Time value of money concept states that the dollar or the money that a person have today has more worth than the  expectation or the promise that an individual or an entity will receive dollar or money in the future. The money that an individual has today has more worth because it can be invested and earn interest. This concept is essential to the financial mangers because they can use it in comparison of the investments alternatives, project appraisals and in solving the problems that involve mortgages, loans, savings, leases and annuities (Peterson & Fabozzi, 2009).