Time Value of the Money (E)
What is the project? How to select and justify the project? How to plan and execute the project?
Posted: Sep 2010
The value of money today can increase over time. If you invest €100 today, it will earn interest. That interest, added to the original value, increases your overall investment. As the interest rate changes, so does the value of the money.
The greater the interest rate, the faster the growth will be on your investment. This process is called compounding.
Four variables are used to compute the time value of money. They are present value (PV), future value (FV), interest rate per year (i), and number of time periods (n). If you know three of the four variables, you can determine the value of the fourth variable.
In this case, we know that the present value is 100, the number of periods is 5 (years), and the interest is 5%.The formula for the time value of money is as follows:
Future Value of n = Present Value (1 + Interest Rate per Year) n
FVn = PV (1 + i) n
Future Value in 5 years = 100 (1 + .05)5 = 127.63 which is the future value of the investment of 100.
Continue on Project Management:
1. Project Management Overview
2. 9 Areas of Project Management
3. Project Lifecycle – 5 Stages of Project
4. How to Determinine a Value of the Project?
4.1. Simple Payback
4.2. Average Return on Investment (ROI)
4.3. Net Present Value (NPV)
4.4. Internal Rate of Return (IRR)
4.5. Cost/benefit analysis
4.6. Time value of money
4.7. Present value of future payments
4.8. Justification of Addopted project
5. Project Planning – Project Charter
6. Work Cascading Structure (WBS)
7. Project Scheduling ( Arrow-on-Arrow and Gantt Chart )
8. Project Scheduling ( CPM and PERT )
9. The Responisbility Matrix
10. Resources and Budget Planning
11. Clasification of Projects