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

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Borrowing money to pursue an advanced degree makes sense if:

the interest rate on the loan is higher than the expected rate of return on the degree.

the total amount borrowed is less than the annual tuition cost.

the loan can be repaid within one year regardless of future earnings.

the present value of the expected increase in future earnings exceeds the cost of borrowing.

Previous problemNext problem

Verified step by step guidance

Understand the concept of present value: The present value (PV) is the current worth of a future sum of money or stream of cash flows, given a specified rate of return (discount rate). It helps compare the value of money now versus in the future.

Identify the expected increase in future earnings: Estimate the additional income you expect to earn as a result of obtaining the advanced degree. This is the future cash inflow.

Calculate the present value of the expected increase in future earnings: Use the formula for present value:

PV = \frac{FV}{(1 + r) n^{-}}

, where FV is the future value (expected increase in earnings), r is the discount rate (interest rate), and n is the number of periods.

Compare the present value of the expected increase in future earnings to the cost of borrowing: The cost of borrowing includes the loan principal and the total interest paid over the loan term. Ensure that the PV of future earnings exceeds this cost.

Make a decision: If the present value of the expected increase in future earnings is greater than the cost of borrowing, then borrowing money to pursue the advanced degree is financially justifiable. Otherwise, it may not be a sound financial decision.