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Unformatted text preview: TVM is used in business for several purposes. It is used for calculating the expected return on capital projects (investments). It is also used to calculate cash flows for bonds (debt) issued or purchased. When performing TVM calculations one must know at least 3 of the following four variables: Interest rate, period of time, present value/future value, cash flow amount per period (payment). Considerations given to any calculation are: 1) Whether cash flows are consistent or vary each period 2) The interest rate (discount rate) 3) Other cash flows related to the calculation 4) The units of measure (months, years, quarter) - these must be consistently applied A TVM calculation is often used in retirement planning. Basically, one should determine the amount of money that must be saved each period to reach some pre-determined level of savings in the future (point of...
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