Mechanics of Time Value :

Some of my friends wanted to know more about the concepts and mechanics of time value, I have tried to put few examples along with it.

The process of discounting future cash flows converts them into cash flows in present value terms. Conversely, the process of compounding converts present cash flows into future cash flows. 

Time Value Principle 1: Cash flows at different points in time cannot be compared and aggregated (i.e. added). All cash flows have to be brought to the same point Continue reading “Mechanics of Time Value :”