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

Which of the following factors affects the present value of an investment?

The company's inventory turnover

The number of shares outstanding

The par value of bonds issued

The discount rate used

Previous problemNext problem

Verified step by step guidance

Understand the concept of present value: Present value (PV) is the current worth of a future sum of money or stream of cash flows given a specified rate of return, known as the discount rate.

Identify the key factor affecting present value: The discount rate is crucial because it determines how future cash flows are discounted to their present value. A higher discount rate reduces the present value, while a lower discount rate increases it.

Clarify why other factors listed do not affect present value: Inventory turnover, number of shares outstanding, and par value of bonds issued are unrelated to the calculation of present value. These factors pertain to operational or equity aspects of a company, not the time value of money.

Relate the discount rate to the time value of money: The discount rate reflects the opportunity cost of capital and the risk associated with future cash flows. It accounts for the fact that money today is worth more than the same amount in the future due to earning potential.

Summarize the importance of the discount rate: The discount rate is the primary factor in determining the present value of an investment, as it directly impacts how future cash flows are valued in today's terms.