Question

Examine the concept of the time value of money in relation to corporate managers. What are two methods in which time value of money can help corporate managers in general?

Answer 1

solution :

1) The time value of cash intimates that payment obtained at various points of time has a separate value. Corporate administrators must regularly focus on maximizing shareholder's money. Maximizing the shareholder's money mainly depends on the time worth of cash flows from investment options.
2) Following 2 ways in time value of money can help corporate administrators in common:
a) NPV (Net present value) : It is necessary to determine whether the investment is ethical or not. Corporate administrators can analyze alternative investments on discover their largest NPV.
b) IRR (Internal rate of return) : IRR realizes the time value money and uses cash flows. This arrangement is fair & clear. A higher internal rate of return improves the manager to determine it's investment options.