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The module introduces time value of money notation (present and future sums, present value, future value, interest rate, periods) and explains cash flow diagrams and conventions. It then contrasts simple interest, where each period’s interest is based on the principal, with compound interest, where earned/charged interest is added to the principal for subsequent periods, including example calculations.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/interest-the-cost-of-money-simple-and-compound-interest/657239/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/interest-the-cost-of-money-simple-and-compound-interest/657239.png","ImageObject",300,407,{"name":92,"@type":93},"PakDamar76","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-29","2026-10-26",true,{"@type":102,"interactionType":103,"userInteractionCount":8},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"What does interest represent in corporate finance?","Question",{"text":112,"@type":113},"Interest represents the cost of having money available for use over a period of time. It includes the difference between repaying more than the borrowed amount and the opportunity cost of using your own money.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"What is the time value of money taxonomy used for?",{"text":117,"@type":113},"It defines relationships between present and future values, such as present sum (P/PV), future sum (F/FV), number of periods (N), and interest rate per period (i), to support valuation over time.",{"name":119,"@type":110,"acceptedAnswer":120},"How do simple interest and compound interest differ?",{"text":121,"@type":113},"With simple interest, each period’s interest depends on the principal outstanding at the beginning of the period. With compound interest, interest earned (or charged) is added to the principal, and the new total earns further interest in subsequent periods.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},657239,1792976244,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":8,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":52,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":129,"read_time":143},962090893057,"https://ap-avatar.wpscdn.com/davatar_155a257f0dc6eb9ab79c44ca47cae57d","Module 1: Corporate Finance and the Role of Venture Capital Financing Time Value of Money  \nModule 1: Corporate Finance and the Role of Venture Capital Financing  \nTime Value of Money  \nTABLE OF CONTENTS  \n1.0 INTEREST – THE COST OF MONEY  \n1.01 Introduction to Interest  \n1.02 Time Value of Money Taxonomy  \n1.03 Cash Flow Diagrams  \n1.1 CALCULATING INTEREST  \n1.11 Simple Interest  \n1.12 Compound Interest  \n1.2 THE CONCEPT OF ECONOMIC EQUIVALENCE 1.21 Introduction  \n1.22 Equivalence with Multiple Cash Flows  \n1.3 NOMINAL AND EFFECTIVE INTEREST  \n1.31 Cash Flow Diagram Exercise Answer  \nfile:///P|/TME Diploma/TME courses/online_courseware/FIN320_content(tme3113)/Interest/interest-01 . htm [09/26/2001 11:46:03 AM]  \nModule 1: Corporate Finance and the Role of Venture Capital Financing Time Value of Money  \n1.0 Interest – The Cost of Money  \n1.01 Introduction to Interest  \nInterest is the cost of having money available for use for a period of time. If you borrow $25,000 to buy a car and repay the loan over 4 years, you will pay back more than $25,000 . The difference is the interest or cost of having use of the money to buy the car.  \nIf you use your own money to buy the car instead of borrowing, you will not pay interest, but there is a cost of using your money for the purchase, i.e. the interest you would have earned if you had invested the $25,000 .  \nMany business transactions involve interest – e.g. borrowing money, lending money, or investing money with the objective of earning a return on investment. In all cases, there are two important considerations:  \n1. the amount of money tied up  \n2. the time or duration the funds will be unavailable for other purposes.  \nfile:///P|/TME Diploma/TME courses/online_courseware/FIN320_content(tme3113)/Interest/interest-02 . htm [09/26/2001 11:46:06 AM]  \nModule 1: Corporate Finance and the Role of Venture Capital Financing Time Value of Money  \n1.02 Time Value of Money Taxonomy  \nP = present sum of money at time zero or now.  \nPV = present value F = future sum of money FV = future value  \nFn = future sum of money at time n N = total number of periods  \nn = total number of periods to a future point in time i = interest rate per period  \nI = total interest earned over N periods  \nt0 = time zero or beginning of time horizon (now) tn = future point in time that is n periods away from t0 A = a uniform series of payments  \nfile:///P|/TME Diploma/TME courses/online_courseware/FIN320_content(tme3113)/Interest/interest-03 . htm [09/26/2001 11:46:06 AM]  \nModule 1: Corporate Finance and the Role of Venture Capital Financing Time Value of Money  \n1.03 Cash Flow Diagrams  \nCash flow diagrams are useful in economic analysis. They depict whether a cash flow is an inflow (receipt) or outflow (disbursement) and when each cash flow occurs.  \nThe normal convention is an upward pointing arrow for a receipt and a downward pointing arrow for a disbursement. Time zero is at the extreme left of the diagram and future periods are to the right of time zero.  \nCash Flow Diagram Example  \nCash Flow Diagram Exercise  \nCreate a cash flow diagram for the following cash flows:  \n1. initial investment of $275,000 at t=0;  \n2. annual operating costs of $15,000/year for 5 years (assume they occur at the end of the year);  \n3. a one time maintenance cost of $20,000 at t=3;  \n4. annual revenues of $75,000 (assume they occur at the end of the year);  \n5. a salvage value of $10,000 at t=5 .  \nAnswer on last page.  \nfile:///P|/TME Diploma/TME courses/online_courseware/FIN320_content(tme3113)/Interest/interest-04 . htm [09/26/2001 11:46:06 AM]  \nModule 1: Corporate Finance and the Role of Venture Capital Financing Time Value of Money  \n1.1 Calculating Interest  \n1.11 Simple Interest  \nMost business transactions involve compound interest. However, it is useful to be familiar with simple interest if for no other reason than to understand the power of compound interest.  \nIn simple interest, the interest expense for each period i","cbCaikJdnu2CogJG","https://ap.wps.com/l/cbCaikJdnu2CogJG","pdf",89954,"English","# 1.0 INTEREST – THE COST OF MONEY\n## 1.01 Introduction to Interest\n## 1.02 Time Value of Money Taxonomy\n## 1.03 Cash Flow Diagrams\n## 1.1 CALCULATING INTEREST\n## 1.11 Simple Interest\n## 1.12 Compound Interest\n## 1.2 THE CONCEPT OF ECONOMIC EQUIVALENCE\n## 1.21 Introduction\n## 1.22 Equivalence with Multiple Cash Flows\n## 1.3 NOMINAL AND EFFECTIVE INTEREST\n## 1.31 Cash Flow Diagram Exercise Answer","[{\"question\":\"What does interest represent in corporate finance?\",\"answer\":\"Interest represents the cost of having money available for use over a period of time. It includes the difference between repaying more than the borrowed amount and the opportunity cost of using your own money.\"},{\"question\":\"What is the time value of money taxonomy used for?\",\"answer\":\"It defines relationships between present and future values, such as present sum (P/PV), future sum (F/FV), number of periods (N), and interest rate per period (i), to support valuation over time.\"},{\"question\":\"How do simple interest and compound interest differ?\",\"answer\":\"With simple interest, each period’s interest depends on the principal outstanding at the beginning of the period. With compound interest, interest earned (or charged) is added to the principal, and the new total earns further interest in subsequent periods.\"}]","Interest - The Cost of Money - Simple and Compound Interest | PDF",25]