MANAGEMENT

Detailed explanation-1: -Money has time value. In simpler terms, the value of a certain amount of money today is more valuable than its value tomorrow. It is not because of the uncertainty involved with time but purely on account of timing. The difference in the value of money today and tomorrow is referred to as the time value of money.

Detailed explanation-2: -Money has time value because: Individuals prefer future consumption to present consumption. Money today is more certain than money tomorrow. Money today is wroth more than money tomorrow in terms of purchasing power.

Detailed explanation-3: -Time value of money works on the principle that money today is worth more than the same amount of money received in the future. There are 5 major components of time value – rates, time periods, present value, future value, and payments.