Asked by Joanna Harrison on Jul 04, 2024
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Present and future value computations enable companies to measure or estimate the interest component of holding assets or liabilities over time.
Present Value
The current value of a future amount of money or stream of cash flows given a specified rate of return, used to assess the worth of future cash flows today.
Future Value
The estimated value of a current asset or an amount of money at a specified date in the future, based on an assumed rate of growth or interest.
Interest Component
The portion of a payment that is attributed to interest on borrowed capital.
- Understand the fundamental concepts of time value of money, including present value (PV), future value (FV), present value of an annuity (PVA), and future value of an annuity (FVA).
- Evaluate the interest component of financial decisions involving investments or loans.
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Learning Objectives
- Understand the fundamental concepts of time value of money, including present value (PV), future value (FV), present value of an annuity (PVA), and future value of an annuity (FVA).
- Evaluate the interest component of financial decisions involving investments or loans.
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