Time value of money

tush991
Mind Map by tush991, updated more than 1 year ago
tush991
Created by tush991 about 6 years ago
59
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Description

Corporate Finance Mind Map on Time value of money, created by tush991 on 18/05/2014.

Resource summary

Time value of money

Annotations:

  • Refers to the fact that money on hand today is generally worth more than the same amount money given tomorrow
1 Future Value and Compounding

Annotations:

  • Future Value refers to the amount of money an investment will grow to after a certain period of time at a given Interest Rate
1.1 Compounding

Annotations:

  • Compounding refers to the process of accumulating interest on the interest of a principle; i.e. accumulating interest on an investment to get more interest over time 
1.2 Types of Interest
1.2.1 Simple Interest
1.2.2 Compound Interest
1.3 Future Value= PV(1+r)^t
2 Present Value and Discounting
2.1 Present Value

Annotations:

  • The current value of future cash flows discounted at an appropriate rate
2.2 Discounted Cash Flow Valuation

Annotations:

  • Calculating the present value of a future cash flow to determine its value today
2.2.1 Discount Rate
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