L3_slides_2.pdf - FIN 301 Lecture 3 Time Value of Money(Chapter 3 Time Value of Money(TVM Time value of money refers to the fact that a dollar today is

L3_slides_2.pdf - FIN 301 Lecture 3 Time Value of...

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FIN 301 Lecture 3
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Time Value of Money (Chapter 3) Time Value of Money (TVM): Time value of money refers to the fact that a dollar today is worth more than a dollar promised at some time in the future. The trade-off of money now and money later depends on the potential rate of return the money may generate Rate of return: Discount rate Cost of capital Opportunity cost of capital Required return Future value (FV): The amount an investment or asset is worth after one or more period.
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