The concept of time value of money figures in many day-to-day decisions. For example, in the viral decision making areas in management like the effective role of interest on a business loan, the mortgagee payment in ;I real estate Transaction and evaluation of true return on investment etc.. the time value of money plays inn important role. Wherever use of money is involved and its inflow and outflow patterns are spread over the time horizon, this concept becomes very useful. For example, consider the following :
- A banker must establish the terms of loan.
- A finance manager is one who considers various alternative sources of funds in terms of' the cost.
- A corporate planner must decide among various investment opportunities.
- A portfolio manager is one who evaluates various securities.
- An individual is one who confronts with a host of daily financial problems ranging from personal credit to management of major purchase decisions.
Primary goal of ally financial manager is to maximize value of the firm. The value of a firm is influenced by vital decisions like capital budgerigar, cost of capital, working capital manageability, mergers and acquisitions. lease or buy decisions. in which the concept of time value of money has a prime role to play.
No comments:
Post a Comment