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Asked by DYLAN PANGIA on Apr 27, 2024

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Briefly describe the time value of money. Why is the time value of money important in capital investment analysis?

Time Value

The notion that having money right now is more valuable than receiving the same amount later, owing to the earning potential it carries.

Capital Investment Analysis

The process of evaluating and comparing potential investments or projects to determine their expected returns and the allocation of capital.

Money

An officially issued legal tender typically consisting of coins and banknotes that is used as a medium of exchange, unit of account, or store of value.

  • Comprehend the concept of the time value of money and its importance in capital budgeting decisions.
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Zybrea KnightMay 02, 2024
Final Answer :
The time value of money means that a dollar today is worth more than a dollar in the future. Since capital investment analysis decisions are often based on cash flows that will be received in the future, managers often use a process called discounting in order to measure future cash flows in the value of today's dollar.

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