Time
value of money is that money available at the present time is worth
more than the same amount in the future due to its potential earning
capacity. This core principle of finance holds that, provided money
can earn interest, any amount of money is worth more the sooner it is
received.
A
key concept of TVM is that a single sum of money or a series of
equal, evenly-spaced payments or receipts promised in the future can
be converted to an equivalent value today. Conversely, you can
determine the value to which a single sum or a series of future
payments will grow to at some future date.
