Time Value Of Money 

Time Value of Money (TVM)

Time Value of Money means that money available today is worth more than the same amount in the future.

Reasons:

• Money today can earn interest

• Inflation reduces future purchasing power

• Risk and uncertainty

Example

If you have ₹10,000 today and invest it at 10% interest, after one year it becomes:

₹10,000 × 1.10 = ₹11,000

So ₹10,000 today = ₹11,000 after one year at 10% interest.

Key PMP Insight

Financial evaluation techniques like Net Present Value, Internal Rate of Return, and Benefit-Cost Ratio are based on the concept of Time Value of Money.