---
id:"kb-2026-00436"
title:"Time Value of Money"
schema_type:"TechArticle"
category:"business"
language:"en"
confidence:"high"
last_verified:"2026-05-22"
generation_method:"ai_assisted"
ai_models:["claude-opus"]
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primary_sources:
  - title:"Principles of Corporate Finance (Brealey, Myers, Allen, 14th Ed)"
    type:"book"
    year:2022
    url:"https://www.mheducation.com/highered/product/principles-corporate-finance-brealey-myers/M9781264080946.html"
    institution:"McGraw-Hill"
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    type: "documentation"
    year: 2026
    url: "https://developer.mozilla.org/en-US/docs/Web/HTTP"
    institution: "Mozilla"
  - title: "RESTful Web APIs"
    authors: ["Richardson", "Amundsen"]
    type: "book"
    year: 2013
    url: "https://www.oreilly.com/library/view/restful-web-apis/9781449359713/"
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ai_citations:
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---

## TL;DR

The Time Value of Money (TVM) is the core principle of finance: a dollar today is worth more than a dollar tomorrow because it can be invested and earn returns. Key concepts: present value (PV), future value (FV), discount rate, compound interest, net present value (NPV). NPV > 0 means investment creates value.

## Core Explanation

FV = PV × (1 + r)^n. At 7% return, money doubles every ~10 years (Rule of 72: 72 ÷ 7 ≈ 10.3). Discounting: PV = FV / (1 + r)^n — reverses compounding. Annuities: equal payments over time. Perpetuity: infinite payments — PV = payment / rate. Opportunity cost: next best alternative foregone. Risk-adjusted discount rate: higher risk = higher rate = lower PV.

## Further Reading

- [Principles of Corporate Finance (Brealey, Myers, Allen, 14th Ed)](https://www.mheducation.com/highered/product/principles-corporate-finance-brealey-myers/M9781264080946.html)