Time Value of Money: Present Value, Future Value, and Cash Flow Sign Conventions

Vocabulary flashcards covering present value, future value, and cash-flow sign conventions from the lecture notes.

Present Value (PV)

The current value of a future cash flow or series of cash flows discounted to today.

Future Value (FV)

The value at a future date of present money after earning interest or returns.

Cash Inflow

Money received; an increase in wealth (positive cash flow).

Cash Outflow

Money paid out; an investment or expense (negative cash flow).

Time Value of Money

Money available now is worth more than the same amount in the future due to earning potential.

Sign Convention

The rule assigning positive/negative signs to inflows and outflows in PV/FV calculations.

Investment Outflow of 100

Paying 100 today as an outflow to invest; expected to yield future returns.

Future Value Sign

The sign (positive/negative) of FV can reflect inflow or outflow; calculations may show either depending on convention.

Excel Sign Handling

Excel adjusts cash flow signs automatically in PV/FV calculations based on the chosen convention.

Inflows vs Outflows

Distinguishing money received (inflows) from money paid (outflows) when evaluating investments.