Decisions Under Certainty: The Time Value of Money (Decisiones Bajo Certeza: El Valor Del Dinero En El Tiempo)
29 Pages Posted: 16 May 2007 Last revised: 12 Mar 2013
Date Written: October 20, 2004
This is a course material from the book Managerial Decision Making Under Risk and Uncertainty. The book is originally in Spanish and is untitled as Decisiones empresariales bajo riesgo e incertidumbre. The level of the book is basic. We use very few mathematics and it is expected to be used by managers.
In this second chapter we deal with the Basic concept in Finance: the time value of Money. A dollar today is worth more than a dollar tomorrow. This concept allows us to find equivalent amounts of Money in different period of time. This will enable us to compare different cash flow profiles. In the last part f the chapter we study the Net Present Value NPV and the Internal Rate of Return, IRR. We use intensively the spreadsheet.
Note: Downloadable document is in Spanish
Keywords: Time value of money, interest, discount process, annuities, real interest rate, discount rate, Net Present Value, NPV, Internal Rate of Return, IRR
JEL Classification: G31
Suggested Citation: Suggested Citation