Describe how the time value of money impacts the terms of a business loan. Explain how the time value of money plays a factor in long-term financial decisions.
Describe how the time value of money impacts the terms of a business loan. Explain how the time value of money plays a factor in long-term financial decisions.
Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)
7th Edition
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Chapter2: Using Financial Statements And Budgets
Section: Chapter Questions
Problem 6LO
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Describe how the time value of money impacts the terms of a business loan.
Explain how the time value of money plays a factor in long-term financial decisions.
Expert Solution
Step 1
The time value of the money states that an amount of money is worth more now than it will be in the future. This is due to the fact that money can only expand via investment. Missed opportunity is the investment that is postponed.
The time value of money formula takes into account the quantity of money, its future value, the amount it can earn, and the time period. The number of compounding periods is also a key variable for savings accounts.
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