WHAT is the “time value of money” and why is it applied to early retirements of capital credits?
This commonly accepted accounting method allows for the valuation of money in the future to be adjusted for today’s value by providing a lump-sum “present value” of the entire amount. Said differently, it factors in the value of money and a typical amount of interest for a given amount of time. For example, $100 of today’s money held for a year at 5 percent interest is worth $105, therefore $100 paid now or $105 paid exactly one year from now is considered the same amount of money paid out.
