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Home > QFINANCE Dictionary > Definition of time value of money

Definition of

time value of money

Finance

potential growth in value over time the principle that a specific amount of money is worth more now than it will be at a date in the future, because the sum available now can be invested and will have grown in value by the date in the future

Recommended Further Reading (Term count)
  • Time Value of Money
    Time Value of Money (TVM) is one of the most important concepts in the financial world. If a business is paid $1 million for something today, that money is worth more than if the same $1 million was paid at some point in the future. The reason money given today is worth more is straightforward: If I have money today, I have the potential to earn interest on the capital.TVM values how much more a given sum of money is worth now (or at a specific...
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    Discounted cash flow (DCF) is a way of measuring the net present value (NPV) of future cash flow. This allows companies to express the value of an investment today based on predicted future returns. The idea behind discounted cash flow is that $1 today is worth more than $1 you might receive in the future. The money you have now can be invested and might generate interest whereas money you haven’t yet received can’t be used in this way, and...

Definitions of ’time value of money’ and meaning of ’time value of money’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’time value of money’ and other financial terms with our online QFINANCE Financial Dictionary.

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