Asked by Simran Singh on Jun 25, 2024
Verified
The main concept of time value of money is:
A) that cash flows received in the distant future are not as valuable as cash flows received in the near future.
B) the recognition of all relevant costs in absolute dollars.
C) that cash flows received in different years should be treated as equal.
D) that cash payments made in the future have the same value today.
Time Value of Money
The concept that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.
Cash Flows
The inflows and outflows of cash for a business, representing the movement of money into and out of the organization.
- Acknowledge the critical role of time value of money in the determination of financial strategies.
Verified Answer
RS
Rohit SaxenaJun 28, 2024
Final Answer :
A
Explanation :
The main concept of time value of money is that cash flows received in the distant future are not as valuable as cash flows received in the near future. This is because of factors such as inflation and the opportunity cost of not having access to the money in the interim. Therefore, present value calculations are used to determine the equivalent value of future cash flows in today's dollars.
Learning Objectives
- Acknowledge the critical role of time value of money in the determination of financial strategies.