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The Right Frame of Time

In: Applied Corporate Finance

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  • Mark K. Pyles

    (College of Charleston)

Abstract

The most important concept in all of finance is the time value of money. As a discipline primarily concerned with defining and calculating values, obtaining consistent, time-relevant estimates is critical. All aspect of corporate finance requires understanding and incorporating the time value of money principles. In the preceding chapter, we made note of the fact that cash flows often occur at different times, and those of most concern are expected to occur at some future time. However, financial decisions are typically made in the current time frame. Thus, the values of those future cash flows need to be adjusted to reflect the differential time periods. This is not to say, however, there aren’t many instances where we want to know what a stream of cash flows will be worth at some point in the future as well. Therefore, we need to closely examine each of these options. There are three basic types of cash flow situations that comprise the study of time value of money: (1) single cash flows, (2) multiple unequal cash flows, and (3) multiple equal cash flows. We will address each of these, in turn, throughout this chapter.

Suggested Citation

  • Mark K. Pyles, 2021. "The Right Frame of Time," Springer Texts in Business and Economics, in: Applied Corporate Finance, edition 2, chapter 4, pages 129-168, Springer.
    • Handle: RePEc:spr:sptchp:978-3-030-81631-5_4
    DOI: 10.1007/978-3-030-81631-5_4
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