Technology management Blog Essay Example | Topics and Well Written Essays - 500 words

Technology management Blog - Essay Example Money has a time value. This means the holder of the money has to make timely considerations when making financial decisions. This is used in our information technology sector. The information technology sector is a business and has to take into considerations the importance of making investment decisions. The time value of money is the fundamental mathematics that revolves around investing and it forms the basis of the financial calculations. Most significantly, it expounds on the concept of compound returns, which is the basic driving force of the investments growth overtime. There are several indicators of the time value of money. They include, net present value, present value, and future value. The present value is the current worth of future sum of money or cash inflows that are attained at a specific rate of return. Future cash flows are discounted at a certain discount rate. This means that the higher the discount rate, the lower the net present value of the future cash flows. The present value of an annuity is the sequence of equivalent payments that are paid at equal time intervals. An example of this is the lease and the rental payments made to house owners. Thirdly, there is the present value of perpetuity. This is an endless and a constant stream of identical cash flows. The last feature of time value of money is the future value. This is the future value of an asset or cash at a specified date that is to occur in the future that should be equal to the value of money at a specified sum now. This includes the future value of an annuity. This is the future value of a sequence of payments known as annuities that assumes the payments are invested at a given rate of interest (ROI). The importance of time value of money is that they provide an insight on the information on the risk of an investment. This helps the investor in being able to assess his business risks that faces him. Secondly, it provides a crude