TVM problems

TVM problems - Time Value Money(TVM problems also known as Present and Future Value problems are where cash is received or paid at various times

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Time Value Money (TVM) problems, also known as Present and Future Value problems, are where cash is received or paid at various times with the goal being to restate all the cash flows into one particular time period equivalency. Our basic assumption is that cash today can be invested and as a result will grow to a larger sum later (future value problems). Therefore the reverse is also assumed. Cash at later dates is equal to the cash invested earlier plus interest, therefore, in order to restate the future cash flows into earlier cash equivalents the interest portion must be taken out (present value problems). n=3 i=10% table factor Timeline visualization: table factor is always 1000 FvAmt |---------------------|---------------------|---------------------|? 1.3310 > 1.000 1000 1000 1000 FvAo |---------------------|---------------------|---------------------|? 3.3100 > number of rents 1000 PvAmt ?|---------------------|---------------------|---------------------| .7513 < 1.0000
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This note was uploaded on 04/03/2012 for the course ACCT 272 taught by Professor Mensah during the Fall '08 term at Rutgers.

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