January 2005
Tutorial

Buying Time

Format:Multimedia
| Pages:1

Abstract

Managers must frequently make decisions involving trade-offs between cash flows to be paid or received at different points in time. Accountants, in turn, must describe transactions that involve the payment and/or receipt of cash far in the future. This interactive tutorial covers the key concepts relating to cash flows taking place in different time periods. Students learn: Why a dollar received or paid in the future is worth less than a dollar today; how to calculate how much less a future dollar is worth, based on an interest rate and how far in the future it is to be received or paid; how to translate a cash flow from any point in time into its present or future value at any other point in time; and how to use annuity tables and Excel functions to simplify some calculations as well as how to solve complex problems using these tools.