ഓം നമോഭഗവതേ വാസുദേവായ ധന്വന്തരയേ അമൃതകലശ ഹസ്തായ

സര്‍വാമയവിനാശായ ത്രൈലോക്യനാഥായ മഹാവിഷ്ണവേ നമ:

TVM & CASH FLOW

Time Value of Money


A. Would be the “INFLATION RATE”.

E.g.:- Rs.1,000.00 for 25 Ltr. Prtrol now; but Rs.1,050.00 a year later.

Hence; TVM is Inflation Rate, 5% here.

B. If 1,000.00 invest in “RISK FREE” Investment; can earn 1,080.00 a year later.

Extra 3% is “REAL RATE OF RETURN”. And 8% is TVM Now.

C. If 1,000.00 invest in “RISKY” Investment; can earn >1,080.00 a year later.

Extra is “RISK PREMIUM”

Now; TVM is Inflation Rate +
Real Rate of Return +
Risk Premium.

"SINGLE CASH FLOW”

A. FV= PV * (1+TVM) ^n OR FV= PV* (1+r) ^ n

E.g.:- 300.00 Rs Invest for 2 years @ 12% pa. =300*(1+0.12) ^ 2 = 376.20

B. PV = FV/(1+TVM) ^ n OR PV= FV/(1+r) ^ n

Alternately;

A. FV = PV * FVF

B. PV = FV * 1/FVF

C. PV = FV * PVF

MAFA

At the heart of finance then is managing money.

Where to invest (Investment Decision),

how much to mobilize (Financing Decision) and

what rewards to offer (Dividend Decision).