bus_401___w2_journal_____present_and_future

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bus_401___w2_journal_____present_and_future

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Running head: PRESENT AND FUTURE VALUESW2 Journal Present and Future Values, and Expected ReturnsNameBUS 401: Principles of FinanceInstructor: NameFebruary 2, 20151PRESENT AND FUTURE VALUES2W2 Journal Present and Future Values, and Expected ReturnsCritically reflect on the importance of present and future values.The concept of present value (PV) and future value (FV) are based on the time value ofmoney. Let us reflect on the definitions of PV and FV. PV is the amount of present day moneyin which one has which equal to the future payments (FV) and is discounted by an appropriatediscount rate to reflect the time value of money. FV is the amount of money in which aninvestment with fixed and compounded interest rate will increase at a future date. It is used tocalculate the value of money by factoring in the time value of the money when makinginvestment decisions. The time value of money is the known as the money which is receivedtoday is worth more than the money to be received at a later date. Financial management inbusinesses uses the time value of money to compare their investment opportunities today to thecost of future payments. They are able to see if the returns from the investment are greater thantheir future payments. If the opportunity costs are low then the financial manager will be able totake on the costs of the investment knowing that there will be a gain in the future for thecompany.What factors must be considered when calcula

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