Time value of money

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Investment and funding appraisal.


Time value of money is the concept that money held now (or receivable immediately) is worth more than the same amount of money to be received at some later time.

The time value of money is reflected in the charging of interest for the use of money, and also in discounted cash flow analysis.

All other things being equal, the time value of money means:

  • Earlier receipts are better than later ones.
  • Later payments are better, compared with earlier payments.
  • Later receipts are worse.
  • Earlier payments are worse.

See also