(Mberiah Only) FIN301: Present Value

Module 2 - Background

Present Value

Required Reading

One of the most common questions I get concerns "Where can I find the present value formula?". While almost all of the links in this Module include the formula, here is a link where the formula is presented very prominently:

Present Value/Rate of Return. Retrieved from http://www.moneychimp.com/articles/finworks/fmpresval.htm

However, do not just fixate on the formulas. While you need to know the formula for the assignments, you also need to understand the logic and intuition behind the formulas. The following links are important not only for the formulas but also to help you understand the material.

Time Value of Money: Self Paced Overview. (n.d.). Retrieved from: http://www.studyfinance.com/lessons/timevalue/index.mv

McCrary, Stuart A. (2010). Mastering Corporate Finance Essentials : The Critical Quantitative Methods and Tools in Finance, Wiley (read chapter 1)

Optional Reading

The Time Value of Money. (n.d.). Retrieved from: http://www.econedlink.org/lessons/index.cfm?lesson=EM37

This tutorial on The Time Value of Money is a good introduction to the module's topic. This reading is a useful place to start because it goes over the basic concept of the time value of money as well as some simple numerical examples.

This Example of Present Value uses a hypothetical situation to illustrate the concept. This shows you how corporate financial managers use the concept of present value to make major decisions about project finance and other matters.

Discounting Future Income and Present Value is also a good interactive tutorial.