Agree/Disagree and Why?

Question: TVM is one of the most important theories in finance - we use it EVERYWHERE in finance.We can use TVM to value stocks, bonds, and even organizations.We can also use TVM in retirement planning, borrowing, leasing, and refinancing.Anyway, take my word for it, TVM is huge.All right, so let's start with some basic questions, then problems.First, what is TVM?In other words, is a dollar worth more today or tomorrow?What rate is used to discount "future values" expected to be received in the future?

Answer: Time Value of Money, or TVM, is the concept used in decision-making to account for future changes in the value of money because a dollar is worth more today than tomorrow.A dollar is worth more today because of inflation, the uncertainty involved with the receipt of a dollar as we move into the future, and opportunity cost.Inflation continues to rise with time and so what we can buy today with a dollar continues to decrease as we move into the future.Uncertainty also continues to rise with time and so a dollar received tomorrow holds more value than the pledge to receive a dollar in three years.Opportunity cost measures what could be gained though investing in the next best alternative; there are always multiple opportunities to invest a dollar, so the next best alternative provides a comparison as to what we give up in order to invest in the chosen alternative.The rate used to discount 'future values' to be received in the future is the discount rate.Applying the discount rate to the future sum of money provides the sum in today's dollars.Other rates used to analyze future dollars after applying the discount rate include Net Present Value (NPV), which provides an estimate of the expected increase or decrease in value of an investment, and Internal Rate of Return (IRR), which provides the breakeven discount rate at which the NPV equals zero.We would want the NPV of an investment to be positive, and we would want the discount rate to be higher than the IRR.