Time value of money is one of the key concept of finance. This presentation includes a basic idea about the time value of money, its significance with a practical problem

1. Time Value Of Money

2. Group Members
• Shahanaz Parvin M18232009
• Kamrun Naher M18232013
• Moumita Tanchangya M18232018
• Shifat-E-Monzur M18232024
• Jannatul Ferdaous M18232035
• Manjurul Hasan M18232038

3. WHAT IS TIME VALUE OF MONEY?
Value of money changes over time.
Value at Present time worth more than same amount in future
2000
80TK
2010
260TK
2019
500TK

4. 10
Importance
Investment Decision Capital Budgeting Decision

5. 10
Techniques of Time
Value of Money

6. Discounting-Present Value Technique
Present Value = Future Value/ (1 + i)n
i Rate of Interest
n Number of years

7. Compounding-Future Value Technique
Future Value = Present Value× (1 + i )n
i Rate of Interest
n Number of years

8. e
Annuity
Series of equal payments made at equal intervals
2019 2020 2021 2022
100
100
100
100*(1.10)3=133
100*(1.10)2=121
100*(1.10)1=110
Future Value of Annuity = 364

9. Annuity-Future Value
Future Value Annuity = C× {(1 + i )n-1}/i
i Rate of Interest
n Number of years
c Cash flow per period

10. 10
Method of calculating
future value

11. Simple Interest Compound Interest
Interest calculated only on
original amount
Interest calculated on the
initial principal and also on
the accumulated interest of
previous periods

12. Reasons of Time Value of Money?
1
Risk & Uncertainty
2
Inflation
3
Consumption
4
Investment
Opportunities

13. PROBLEM
e
2024
1.5Crore tk
e
Next 5yr?
X tk
e
2019
20 Lakh tk
i=12%

14. e
2019
20 Lakh tk
e
2024
35.25 Lakh tk
Future Value = Present Value× (1 + i )n
35.25 lakh tk = 20 lakh tk × (1 +.12 )5
Remaining =1.5 Crore – 35.25 Lakh = 114.75 Lakh tk
Part-One

15. Part-Two
Future Value Annuity = C× {(1 + i )n-1}/i
e
2019 2020 2021
c
c
x*(1.10)5
x*(1.10)4
2022 2023 2024
c
x*(1.10)3
c
x*(1.10)2
x*(1.10)1
c
=114.75 Lakh tk

16. e
2024
114.75 Lakh tk
Part-Two
e
Next 5yr
18.062 Lakh tk
Future Value Annuity = C× {(1 + i )n-1}/i
114.75 = 18.062× {(1 + .12 )5-1}/.12

17. THANK YOU