Price of Time and Present Value (3.1–3.3)

Vocabulary flashcards covering key terms from the lecture on Price of Time, Present Value, and the Valuation Principle.

Price of Time

The idea that a dollar today is worth more than a dollar in the future, forming the foundation for present value analysis.

Present Value (PV)

The current worth of future cash flows discounted at the appropriate market rate.

Valuation of Assets

Business function focused on determining the worth of real or financial assets using market prices.

Management of Assets

Business function involving acquiring or selling assets to maximize firm value.

Real Assets

Physical or tangible assets such as property, plant, and equipment that generate cash flows.

Financial Assets

Intangible claims on future cash flows, such as stocks and bonds.

Valuation Principle

Rule stating that an asset’s value is determined by its competitive market price and that benefits and costs must be measured using these prices.

Competitive Market Price

The prevailing price in an open market where buyers and sellers freely trade, used to evaluate benefits and costs.

Investment Opportunity

A potential project or asset purchase whose value is assessed by comparing its benefits and costs in market terms.

Market Value of the Firm

Total value of a company as determined by market prices, increased when benefits exceed costs in a decision.