5
The Time Value of Money, Discounted Cash Flows, and Valuation
Learning Objectives
Explain what the time value of money is and why it is so important in the field of finance.
Explain the concept of future value, including the meaning of the terms principal, simple interest, and compound interest, and use the future value formula to make business decisions.
Explain the concept of present value and how it relates to future value, and use the present value formula to make business decisions.
Explain why cash flows occurring at different times must be adjusted to reflect their value as of a common date before they can be compared, and compute the present value and future value for multiple cash flows.
Explain the difference between an ordinary annuity and an annuity due, and calculate the present value and the future value of an ordinary annuity and an annuity due.
Explain what a perpetuity ...
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