¶ … Value of Money
A lot of people today think more about "stuff" than how much money it takes to buy that "stuff." Like a burger. It may be only a buck, but it takes someone working for $10 an hour ten minutes to make that much money, more if you factor in income and other taxes you pay. I'll bet it takes you less than ten minutes to eat that burger, so your time value of money is negative, which means, the item cost you more than your time to buy it. That's the idea of time value of money. It takes you a certain amount of time to earn it. When you think about that, you may not see your stuff the same way at all.
Here's another way to look at it. You want a new iPod. The one you want is $269.99 plus tax. Using our $10 per hour model, you'd have to work 26.99 hours to pay for your new tech toy, not including tax. For someone working part-time, that would be an entire paycheck or more. So, are you willing to work 30 hours for the iPod? When you look at the time value of money, it makes you realize just how expensive items can be, and how we don't value our time as much as we should.
That brings up another point about the time value of money. Say you're an artist. You spend dozens of hours creating a painting, or a piece of pottery, or a piece of clothing. If you want to stay in business and make a profit, you need to pay for your materials, but you also have to factor in the time it took you to create it. Your time is valuable, and people who ignore that fact don't make a profit on what they sell. Are you worth $10 an hour? How about $50 or $60? As you gain experience, your time value goes up, and that's why well-respected artists earn so much money -- they have a very high time value to money.
Before you buy something, it's good to take a look at the time value, and if it's really a good buy or not. The burger wasn't, the iPod was if you wanted it badly enough, and as you gain experience, your time value improves and you get more bang for your buck. That's the essence of the time value of money.
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value of money reflects the fact that money diminishes in value over time. A dollar today has more buying power than a dollar tomorrow does. The time value of money holds under conditions where there is inflation. As the price of goods and services rises over time, the purchasing power of a dollar diminishes over time. The time value of money concept in finance reflects this reality by translating
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Project Management (Business) Return on Investment is applicable to decision making by the management by making use of projected proceeds in addition to the time value of money. The weighed up total cost of the project over the five-year time period of its life cycle $20 million. The intent of the organization is the plan to borrow this full amount and from then on recompense the debt every year in 5-year
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Week 1 Discussion What is Money Worth Time value of money is an important consideration when making financial decisions. For instance, money is useful for making immediate transactions—but if one holds onto cash too long, what happens to the value of the dollar over time? An historical chart shows perfectly well what happens: it loses value substantially. Thus, to maintain the value of one’s wealth it is important to think about alternative
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