Why is a dollar today worth more than a dollar in the future? In your opinion, w

Business & Finance
Tutor: None Selected Time limit: 1 Day

Why is a dollar today worth more than a dollar in the future? In your opinion, will this benefit or hinder profits? Explain your reasoning.

Oct 10th, 2015

Hi there! Thank you for the opportunity to help you with your question!

The main reason a dollar today is worth more is due to inflation, and more especifically, interest rates. Over time, prices go up, and so do investments, so the buying power of the dollar changes over time. In a stable country, with controlled inflation, yearly quantities such as revenue and costs will be paid with about the same value of the dollar, not having much effect in general. However, if inflation is high, then it might be that you pay something with a "dollar from the past", which is worth more, but when you receive the payments from a "dollar from the future" (where future can be just a few weeks or months in a hyperinflative scenario), then your profit, which will be in dollar from the future minus dollar from the past will be hindered, you will be making less profit effectively.

Please let me know if you need any clarification. Always glad to help!
Oct 10th, 2015

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Oct 10th, 2015
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