Time Value of Money

UNIT 3: Time Value of Money

The time value of money is introduced in this unit. You will learn how and why the value of money changes over time. You will also be introduced to the ideas of present value and future value and how those computations are used to evaluate a potential investment. The topics in this unit are quantitative, with several formulas introduced and explained. All of the computations can be completed using a financial calculator. You will learn how to identify the key variables necessary for input into the calculator to find the proper solution. The concepts presented in this unit are important because much of the remainder of the workbook builds upon them.

UNIT 4: Valuing Financial Assets

An introduction to the process of valuing financial assets is provided in this unit. These simple methods for valuation are based on the ideas presented in Unit Three. The unit provides an explanation of some of the basic terms associated with financial assets. Basic formulas used to place a value on simple financial assets (bonds, preferred stock, and common stock) are also demonstrated. The unit requires some mathematical calculations, but all are simple and straight-forward. The ideas for valuing these securities serve as building blocks when more complex securities are being considered.

UNIT 5: Introduction to Capital Budgeting

The basic ideas and methodologies surrounding capital budgeting are introduced in Unit Five. You will see how the idea of present value can be used to evaluate alternatives for capital investment when resources are scarce. The most important points in this unit are the calculation of net present value and internal rate of return. These two computations are important for the evaluation of many types of projects and securities. Most financial calculators will perform the computations, and we will demonstrate how to identify the key variables needed for input into your calculator.