Notes of a second year student studying Bachelors of Accounting at the University of the Free State. With this notes that i have compiled, i was able to proudly say that i received a distinction in Financial Management by using this notes. If you are struggling with Financial Management use this no...
Chapter 4: Time Value of Money
Value of money
Value = Interest AND Dividends (Capital gain)
Investments – We want higher interest, soon
Why soon?
• Lower risk
• In control of decisions
• Buying power
Principle 1
A Rand today is worth more than R1 in the future
Present Value Value of money @ year zero
Always negativie
Future Value Value of money in the future, after interest has beed added.
Payment Sign (+/-) is determined by the inflow or outflow of PV. PMT can be an outflow
& inflow.
IF:
PV Outflow & PMT Outflow
PMT will be a negative
OR
PV Inflow & PMT Inflow
IF:
PV Outflow & PMT Inflow
PMT will be a positive
OR
PV Inflow & PMT Outflow
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