Time value of money is measured by interest rates. Money has time value because it can earn more over time through interest (earning power) and its purchasing power changes with inflation. The present value of a future amount can be calculated using the present value formula, which takes into account the discount rate and number of periods until receipt. As time passes, the value of assets invested in a project will change. Assets are items owned that have future economic benefit and are divided into tangible assets with physical form and intangible assets without physical form.

1. Time value of money and
assets
Dr. K. Shahzad Baig
Memorial University of Newfoundland (MUN) Canada

2. Time Value of Money
Money has a time value because it can earn more money over time
(earning power).
Money has a time value because its purchasing power changes over time
(inflation).
Time value of money is measured in terms of interest rate.
Interest is the cost of money—a cost to the borrower and an earning to

3. 𝑃𝑉 =
𝐹𝑉
(1 + 𝑖) 𝑛
PV = Present value
FV = Future value
i= Discount rate
N = number of period untill FV is received
As time changes the value of money invested on any project also change

4. Assets are items that people, companies, or
even a country owns or controls.
Assets are the economic resources of a company.
A resource with economic value provide
future benefit.
Cost Analysis: Assets
Assets are divided into 2 groups:
Tangible
Intangible
A tangible asset is an asset that has a physical form

6. Following books were used in preparation of notes
 Blank, L., Tarquin. A. 2005. Engineering Economy. 6th Edition, McGraw-Hill.
 Eschenbach, T. G. 2003. Engineering Economy”, 2nd Edition, Oxford University Press
 Riggs, J. L., Bedworth, D. D., Randhawa, S. U. 1996. Engineering Economics”, 4th Edition, Tata McGraw-Hill.
 Riggs, J. L., West. T. M. 1986. Essentials of Engineering Economics”, 2nd Edition, McGraw-Hill.
 Peter, M. S., Timmerhaus, K. D. 1991. Plant Design and Economics for Chemical Engineers. 4th Edition, McGraw-
Hill.