LEARNING TEAM A DISCUSSION QUESTIONS
1. How do you explain the use of time value of money (TVM) in business?
The principle of the Time Value of Money indicates that “a dollar today is worth more than a dollar received a year from now because a dollar today can be invested and earn interest.”
This is an extremely significant theory in business in view of the fact that financial managers when undertaking new investments have to support their decision about whether or not this investment will add value to the firm and hence accomplish the goal of financial management “maximizing shareholders’ wealth”.
2. What considerations are made when calculating TVM? The consideration that he or she should make when “calculating time value of money is to first identifying the cash flows and their timing and understand that there are always five variable to the problem” (Mayes, 2011, para 1). These variables or menu keys “are PV; present value, FV; future value, N; number of periods, I; interest rate and PMT; for payment amount.
One out of the five variables will always equal to 0, which provide four variables and three of those four, he or she will know the variable leaving to solve the remaining value” (Mayes, 2011). In the financial calculations entering of cash flow are enter in negative and positive numbers; such as outflow; negative and inflow; positive. The positive and the negative represent the concept that you put in something and you generally take it out and if any variables other than PV, FV, N, I, PTM are presented he or she should always enter 0 for that value. This clears the value of the calculation (Keown, Martin, Petty & Scott, 2005).

3. How may you use TVM to create your own?
There are three basic reasons to support the TVM theory. First, a dollar can be invested and earn interest over time, giving it potential earning power,