What is the time value of money?.

1) What is the time value of money? In your answer draw a time line and show how money is discounted back to the present value.

2) Give three examples of how the time value of money might take on importance in business decisions (hint: IRR/NPV models for capital budgeting is one).

3) Have you ever put money into a savings account or investment account that earns a rate of return (interest)? If so, please explain.