Question

With respect to cash flows, Time Value of Money states you ___(1)_____ and in Finance, cash is _(2)___ because it is _(3)______.

A.(1) can discount all of the cash flows after adding them together; (2) bad, (3) usually wasted
B.(1) you can sum the cash flows and then compute the Future Value; (2) non-existance, (3) seldom acquired through sales
C.(1) cannot add, subtract, or compare numbers at different points in time; (2) King, (3) the only thing you can spend or invest
D.(1) can only sum numbers that are at least one year out; (2) not worth a lot; (3) it is too difficult to maintain

Answer 1

The Time Value of Money in Finance states that you can discount all of the cash flows after adding them together to compute the Future Value. Cash is valuable because it is the only thing that can be spent or invested. Present discounted value is also used in other fields such as physical capital investments and government decision making.

Step-by-step explanation:

The Time Value of Money in Finance states that you can discount all of the cash flows after adding them together in order to compute the Future Value. Cash is considered valuable in finance because it represents the funds that can be spent or invested. It is the only thing that can be spent or invested and is acquired through sales or other means.

For example, when calculating the present value of a bond, the present value is the same for both the borrower and the lender. This is because the bond moves money around in time from those who save in the present to those who want to borrow in the present. The present value of what is received by the borrower is identical to the present value of what will be repaid to the lender.

In addition to finance, the concept of present discounted value is also used in other fields such as physical capital investments, government decision making, and analyzing costs and benefits over time.