Using the Time Value of Money Decision Tree to Calculate an Athlete’s Contract Offers

2017 ◽  
Vol 6 (1) ◽  
pp. 48-57
Author(s):  
B. David Tyler
Keyword(s):  
Critical Thinking ◽  
Decision Tree ◽  
Professional Sports ◽  
Cash Flows ◽  
Discount Rates ◽  
Deferred Compensation ◽  
Time Value Of Money ◽  
Time Value ◽  
The Impact ◽  
Value Of Money

Time Value of Money (TVM) is an essential concept within finance, yet its fundamentals confuse many students. This case offers the TVM Decision Tree to guide students to logical solutions through a step-by-step approach that requires critical thinking about cash flows. Students follow a sport agent as she reviews contract offers for her client. She received four offers with payments structured in wildly different ways, including single payments, growing annuities, and delayed annuities. She must use her knowledge of TVM and the TVM Decision Tree to determine which contract will provide her client with the largest contact in terms of PV. She will find that the contracts with the largest nominal values are not necessarily worth the most in terms of PV. She will also see the impact that different discount rates can have in making her decisions, as well as learn about deferred compensation within professional sports.

Embedding futurity in urban governance: Redevelopment schemes and the time value of money

2020 ◽  
pp. 0308518X2093668
Author(s):  
Rachel Weber
Keyword(s):  
Urban Governance ◽  
Participant Observation ◽  
Cash Flows ◽  
Value Capture ◽  
Municipal Governments ◽  
Time Value Of Money ◽  
Time Value ◽  
Public Subsidy ◽  
Objects Of Knowledge ◽  
Value Of Money

Whether appraising development projects or underwriting bonds to finance infrastructure, municipal governments rely on “time value of money” (TVM) techniques to discount and convert hypothetical future cash flows into objects of knowledge in the present. I analyze these calculative techniques through participant observation and interviews with professionals involved in redevelopment projects funded by Tax Increment Financing (TIF) in the Midwestern United States. I find that the TVM assumptions used in models to estimate future values help embed financialized modes of futurity into governance, leveraging the tax base for entrepreneurial urbanism. I describe the contexts in which these techniques are used and, drawing on the literature on the social construction of value, the future imaginaries they perform. I explain why the local state adopts the private sector’s low discount rates and the material effects of this mimicry: inflated estimates of future property values, which are capitalized into larger amounts of public subsidy and, possibly, higher actual values. Future values are also the basis for co-rent-seeking, whereby the state attempts to repay debt on infrastructure through the production of surplus value in land. With institutional support, the techniques and assumptions underpinning these land value capture strategies intensify development and create a reinforcing spiral of asset appreciation.

scholarly journals IPTEKS NILAI WAKTU UANG DAN IMPLIKASI PENCATATAN AKUNTANSI

2019 ◽  
Vol 3 (2) ◽  
Author(s):  
Novi Swandari Budiarso
Keyword(s):  
Interest Rate ◽  
Balance Sheet ◽  
Financial Statements ◽  
Cash Flows ◽  
Time Value Of Money ◽  
Time Value ◽  
Financial Position ◽  
Income Statement ◽  
Statement Of Cash Flows ◽  
Value Of Money

Most of general public and firms know about money and its value but do not have better understanding how the money creates its own value relates to interest rate. Another side, most of firms still not realize that the time value of money has an impact on accounting recording and its reporting in financial statements, such as statement of financial position (balance sheet), income statement, and statement of cash flows.

scholarly journals Impact of Time Value of Money Theory in Ijarah Sukuk Genuineness: the Case of Bahrain and Malaysia

2018 ◽  
Vol 11 (7) ◽  
pp. 56
Author(s):  
Abdul Rahman Ateeyah Sharif ◽  
Adam Abdullah
Keyword(s):  
Central Bank ◽  
Major Effect ◽  
The Other ◽  
Time Value Of Money ◽  
Time Value ◽  
Conventional Instruments ◽  
Library Research ◽  
The Impact ◽  
Value Of Money

This research is a case study of two Ijarah Sukuk issuances in two countries. One issued by central bank of Bahrain and matured in 2014 and the other was issued by the Malaysian company TSH Resources Bhd and matured in 2017. By adopting library research and document analaysis, this research examines the terms and conditions of both cases based on what has been disclosed in the prospectuses. Accordingly, this study presents the impact of the Time Value of Money (TVM) in these cases and how it differentiates between genuine Ijarah Sukuk and a duplicate-bond Sukuk. The study revealed that there were some Shari’ah non-compliance issues in the implementation of Sukuk concept in both cases in a way it emulates conventional instruments featured as guaranteed-return instruments, which take into account TVM as an essential compenent in calculating its returns. However, such practice has a major effect on the genuineness of Sukuk, in terms of Shari’ah-compliance risk.

scholarly journals Amaya Company: Financial Considerations For Product-Mix LP Models

2011 ◽  
Vol 4 (11) ◽  
pp. 13
Author(s):  
Dennis F. Togo
Keyword(s):  
Linear Programming ◽  
Operations Management ◽  
Decision Aid ◽  
Cash Flows ◽  
Product Mix ◽  
Initial Product ◽  
Time Value Of Money ◽  
Time Value ◽  
Value Of Money ◽  
Interest Expense

The Amaya Company case illustrates how financial considerations can be added to product-mix linear programming (LP) models to create a more realistic and robust decision aid. Most managerial/cost accounting or operations management courses introduce product-mix LP models but without financial considerations such as cash flows and its interest expense, debt covenants, or the time value of money. Hence, the initial product-mix solution may not be acceptable when managers scrutinize its impact for related financial requirements. Students completing the Amaya Company case add financial considerations to a product-mix LP problem and examine the resulting change from the misleading initial solution.

MONETARY VALUATION OF CASH FLOWS UNDER KNIGHTIAN UNCERTAINTY

2011 ◽  
Vol 14 (01) ◽  
pp. 1-15 ◽  
Author(s):  
HANS FÖLLMER ◽  
IRINA PENNER
Keyword(s):  
Time Horizon ◽  
Risk Measures ◽  
Cash Flows ◽  
Knightian Uncertainty ◽  
Infinite Time ◽  
Time Value Of Money ◽  
Convex Risk Measures ◽  
Time Value ◽  
Reference Measure ◽  
Value Of Money

The classical valuation of an uncertain cash flow in discrete time consists in taking the expectation of the sum of the discounted future payoffs under a fixed probability measure, which is assumed to be known. Here we discuss the valuation problem in the context of Knightian uncertainty. Using results from the theory of convex risk measures, but without assuming the existence of a global reference measure, we derive a robust representation of concave valuations with an infinite time horizon, which specifies the interplay between model uncertainty and uncertainty about the time value of money.

scholarly journals An EOQ model for a deteriorating item with non-linear demand under inflation and a trade credit policy

2005 ◽  
Vol 15 (2) ◽  
pp. 209-220 ◽  
Author(s):  
S.K. Manna ◽  
K.S. Chaudhuri
Keyword(s):  
Trade Credit ◽  
Optimal Solution ◽  
Cash Flows ◽  
Credit Policy ◽  
Time Value Of Money ◽  
Time Value ◽  
Eoq Model ◽  
Non Linear ◽  
Demand Rate ◽  
Value Of Money

This paper develops an infinite time-horizon deterministic economic order quantity (EOQ) inventory model with deterioration based on discounted cash flows (DCF) approach where demand rate is assumed to be non-linear over time. The effects of inflation and time-value of money are also taken into account under a trade-credit policy of type "?/T1 net T". The results are illustrated with a numerical example. Sensitivity analysis of the optimal solution with respect to the parameters of the system is carried out.

scholarly journals A Paradox Within The Time Value Of Money: A Critical Thinking Exercise For Finance Students

2016 ◽  
Vol 9 (2) ◽  
pp. 83-86 ◽  
Author(s):  
Charles J. Delaney ◽  
Steven P. Rich ◽  
John T. Rose
Keyword(s):  
Critical Thinking ◽  
Learning Process ◽  
Thinking Skills ◽  
Critical Thinking Skills ◽  
Present Value ◽  
Time Value Of Money ◽  
Time Value ◽  
Value Of Money

This study presents a paradox within the time value of money (TVM), namely, that the interest-principal sequence embedded in the payment stream of an amortized loan is exactly the opposite of the interest-principal sequence implicit in the present value of a matching annuity.  We examine this inverse sequence, both mathematically and intuitively, and argue that it provides an excellent exercise for finance students to explore, both to enhance their critical thinking skills as well as to strengthen their understanding of TVM concepts.  Additionally, such an exercise will involve them actively in the learning process, as mandated by AACSB International’s Eligibility Procedures and Standards for Business Accreditation.

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