logging in or signing up TIME VALUE OF MONEY john4rambo Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: Embed: Flash iPad Dynamic Copy Does not support media & animations Automatically changes to Flash or non-Flash embed WordPress Embed Customize Embed URL: Copy Thumbnail: Copy The presentation is successfully added In Your Favorites. Views: 5993 Category: Education License: All Rights Reserved Like it (2) Dislike it (0) Added: April 19, 2010 This Presentation is Public Favorites: 4 Presentation Description No description available. Comments Posting comment... By: sultan12 (2 month(s) ago) really good. please send it my mail firstname.lastname@example.org..i'm very grateful to u Saving..... Post Reply Close Saving..... Edit Comment Close By: yasendra (26 month(s) ago) GOOD Saving..... Post Reply Close Saving..... Edit Comment Close By: llakhan (36 month(s) ago) This is an excellent presentation pl mail it to me for presentation in class Saving..... Post Reply Close Saving..... Edit Comment Close Premium member Presentation Transcript FINANCIAL MANAGEMENT : FINANCIAL MANAGEMENT TEAM MEMBERS : TEAM MEMBERS Sheshmani Upadhyay Anit Kakkar Nand Kishore Sharma IMPORTANCE OF TIME VALUE OF MONEY : IMPORTANCE OF TIME VALUE OF MONEY What is Time Value Of Money ? : What is Time Value Of Money ? The amount of money received today, is worth more important than the same amount of money, received in future. : The amount of money received today, is worth more important than the same amount of money, received in future. FOR EXAMPLE : FOR EXAMPLE Which would you prefer – Rs.10,000 today OR Rs.10,000 in 5 years? Obviously, Rs. 10,000 TODAY Why is TIME such an important elementin decision? : Why is TIME such an important elementin decision? For present need For Re-investment purpose Future uncertainties Methods of Time Value Adjustment : Methods of Time Value Adjustment Compounding Technique :-- -- is used to find out the Future Value (FV) of a Present sum. 2. Discounting Technique :-- -- is used to find out the Present value of a Future sum. 1. Compounding Technique : 1. Compounding Technique 1. The Future Value (F.V) of a single present cash flow, F.V = P.V (CVF)r,n 2. The F.V of a series/Annuity cash flow. F.V = Annuity Amount*CVAF WHICH TABLE TO SEE ? : WHICH TABLE TO SEE ? Read the question carefully 2. If given, to find F.V/P.V :-- (i)For single sum for certain period of time then – simple F.V/P.V table (ii) For series of sum/annuity amount then -- CVAF/PVAF table ****Rest depend upon the practice.**** 1. The F.V of a single present cash flow, : 1. The F.V of a single present cash flow, Example :- One has to find out the F.V Given :- P.V – Rs.10000 Rate – 5% Time -- 10 years Slide 13: P.V = 10000 C.V.F= 1.629 Put in formula F.V = P.V*C.V.F 10000*1.629 Ans = Rs.16290 2. The F.V of Annuity cash flow. : 2. The F.V of Annuity cash flow. ( F.V = Annuity Amount*CVAF ) ANNUITY :--) A finite series of equal cash flow made at regular interval. C.V.A.F -- Compound Value Annuity Factor Slide 15: Example:- ( F.V = Annuity Amount*CVAF ) Find F.V **Suppose that a firm deposits Rs 5,000 at the end of each year for 4 years at 6% rate of interest. How much would this annuity accumulate at the end of the fourth year? Solution:-- We first find CVFA which is 4.3746. If we multiply 4.375 by Rs 5,000, we obtain a compound value of Rs 21,875 2. Discounting Technique : 2. Discounting Technique 1. The Present Value (P.V) of a single present cash flow :-- P.V = F.V (PVF)r,n 2. The P.V of a series/Annuity cash flow :-- P.V = Annuity Amount*PVAF Slide 17: The Present Value (P.V) of a single present cash flow :-- P.V = F.V (PVF)r,n **Example :-- What is the present value of Rs.10,000 received 5 years from now if your required rate of return is 12%. Solution:--We first find PVF which is 0.567 If we multiply 0.567 to Rs 10,000, we obtain a compound value of Rs 5670 2. The P.V of Annuity cash flow. : 2. The P.V of Annuity cash flow. **If Unitech expects to receive Rs.5,00,000 for a period of 10 years from a new project it has just undertaken. Assuming 12% rate of interest. What will be the present value of this annuity. Solution:-- The PVAF is 5.65 Multiply (5.65)PVAF with Rs.5,00,000 We get :-- Rs.2825000 conclusion : conclusion The concept of time value of money can be applied to a particular amount ,or a series of amount i.e the Annuity amount. It can be used to find out the rate of interest, or number of period of cash inflows/outflows. Thus time value plays an important role in the consideration of any financial decision. THANK YOU : THANK YOU ANY QUESTION : ANY QUESTION Slide 26: Compounding is the process of finding the future values of cash flows by applying the concept of compound interest. You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.