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IS TIME VALUE OF MONEY IS IMPORTANT CONCEPT FOR WEALTH MAXIMIZATION?

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Time  value  of  money  in  ears  that  worth  of  a  rupee  received  today  is  different  from  the  worth of  a  rupee  to  he  received  in  future.  Tine  preference  of  money  now  as  compared  to  future money  is  known as  lime  preference for  money, A  rupee  today  is  more  valuable than  rupee after  a  year  due  to  several  reasons:

■ Risk  - There is  uncertainty  about the  receipt of  money  in  future.
Preference  for  present  consumption  -  Most  of  the  persons  and  companies  in  general, prefer  current  consumption over  future  consumption.

■ Inflation  -  In  an  inflationary  period  a  rupee  today  represents  a  greater  real  purchasing power  than  a  rupee a  year  hence.

■ Investment  opportunities  -  Most  of  the  persons  and  companies  have  a  preference  for present  money  because  of  availabilities  of  opportunities  of  investment  for  earning additional  cash flow, Many  financial  problems  involve  cash  flow  accruing  at  different  points  of  time  for  evaluating such  cash flow  an explicit  consideration  of  time  value  of  money  is  required. Thus  for maximizing  wealth  in real  terms,  time value  of  money  should  be  considered.

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