topic of project management

1. PRESENTED BY
DEEPANSHU BANSAL
KARAN MALHOTRA
VAISHALI AGRAWAL

2. OVERVIEW
OF
TIME
VALUE
OF
MONEY

3. ● Time value of money means that the value of money is
different in different time periods. The value of money
received today is more than the value of same amount
receivable at some other time in future.
● The difference in the value of money today and
tomorrow is referred as time value of money.
Four reasons may be
attributed to the
individual’s time
preference for money:
● Investment
Opportunities
● Risk (Future is
uncertain and
risky)
● Personal
Consumption
Preference
● Inflation
(Purchasing
power)

4. TECHNIQUES OF
TIME VALUE OF
MONEY
Two most common methods of adjusting cash flows for time value
of money:
Compounding—the process of calculating future values of cash
flows
Discounting—the process of calculating present values of cash
flows.

5. VALUATION CONCEPT
SIMPLE INTEREST
Simple Interest refers to an interest
that is calculated as a percentage of
the principal amount.
Simple Interest = Po (I)(n)
Po= Principle amount at year 0
I=Interest rate per annum
N= number of years for which
interest is calculated
COMPOUND INTEREST
Compound Interest refers to an interest
which is calculated as a percentage of
principal and accrued interest.
FVn =Po(1+I)n
FVn =Compound or Future value at the
end of n years
Po=Principle amount at year 0
I= Interest rate per annum
n=number of years for which
compounding is done

6. ● Annuity is a series of even cash flows for a specified duration. It involves a regular
cash outflow or inflow. For e.g. recurring deposit, systematic investment plan, life
insurance premium etc.
● If cash flows happen at the beginning of the year, it is called annuity due, whereas
when the cash flows happen at the end it is called as a regular or ordinary or
deferred annuity.
1.If cash flow happens at end of the year
CVn = P (1+𝐼) 𝑛−1 𝐼 Or CVn = P (CVIFAI.n )
2. If cash flow happens at beginning of the year
CVn=P 1+𝐼 𝑛−1 𝐼 1 + 𝐼 Or CVn = P (CVIFAI.n ) ( 1+I)
CVn = Compound Value
P= Fixed Periodic cash inflow or outflow
I= Interest rate per annum
n=number of years to maturity