Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

Which rate is used to calculate the present value of future cash flows in time value of money equations?

Tax rate

Growth rate

Discount rate

Inflation rate

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Verified step by step guidance

Understand the concept of 'time value of money,' which states that money available today is worth more than the same amount in the future due to its earning potential.

Recognize that the 'discount rate' is the rate used to calculate the present value of future cash flows. It reflects the opportunity cost, risk, and time value of money.

Learn the formula for calculating the present value (PV) of future cash flows: \( PV = \frac{FV}{(1 + r)^n} \), where \( FV \) is the future value, \( r \) is the discount rate, and \( n \) is the number of periods.

Understand that the discount rate can vary depending on the context, such as the company's cost of capital, required rate of return, or market interest rates.

Apply the discount rate in practical scenarios to evaluate investment opportunities, compare cash flows, or make financial decisions based on the present value of future amounts.