Time Value of Money

2 Oktober 2018
 Peran Time Value of Money dalam Finance

- Kebanyakan financial decisions melibatkan costs

yang dikeluarkan sekarang & benefits yang
diperoleh dari waktu ke waktu di masa yang akan
datang

Question

Jika sebuah perusahaan mempunyai kesempatan melakukan

investasi dengan pengeluaran kas awal $15,000 sekarang, dan
investasi tersebut diperkirakan menghasilkan $17,000 selama 5
tahun seperti disajikan dalam tabel berikut. Apakah investasi ini
layak dilaksanakan?
Peran Time Value of Money dalam
Finance
YEAR Cash Outflow Cash Inflows
Year 0 $15,000
Year 1 $ 3,000
Year 2 $ 5,000
Year 3 $ 4,000
Year 4 $ 3,000
Year 5 $ 2,000
Total $17,000
 Peran Time Value of Money dalam
Finance

Answer:
Belum tentu layak. Jika arus kas masuknya di
bawah $15,000 pun belum tentu bahwa
investasi tsb tdk menguntungkan.
 Peran Time Value of Money dalam
Finance
• Untuk menjawab pertanyaan tersebut diperlukan
konsep Time Value of Money.
• Ada 2 cara untuk membandingkan jumlah dana yang
dikeluarkan sekarang dengan arus kas masuk yang akan
diterima di waktu yang akan datang:
– Apakah arus kas yang diterima di waktu yang akan datang
tsb ekuivalen dengan $15,000?, atau dengan kata lain
berapa besarnya future value?
– Apakah jumlah yang dikeluarkan hari ini sebesar $15,000
ekuivalen dengan $17,000 yang akan diterima selama 5
tahun yang akan datang?, atau dengan kata lain berapa
besarnya present value dari arus kas yang akan diterima
selama 5 tahun yang akan datang?
 Alat bantu untuk menghitung Time
Value of Money
• Menggunakan persamaan

• Menggunakan Financial Calculators

• Menggunakan Spreadsheets

• Menggunakan Financial Tables

 Basic Patterns of Cash Flow
• Cash inflows dan outflows suatu perusahaan mempunyai pola
tertentu yang meliputi: single amount, annuity, atau mixed stream:
• Single amount: sejumlah uang, baik yang dipegang sekarang
maupun yang akan diterima di waktu yang akan datang.
• Annuity: adalah suatu seri arus kas masuk atau arus keluar yang
SAMA besarnya.
• Mixed stream: adalah suatu seri arus kas masuk atau arus keluar
yang TIDAK SAMA besarnya.
 Future Value of a Single Amount
• Future Value techniques: mengukur nilai arus kas pada akhir
umur proyek.
• Future value adalah uang tunai yang akan kita terima pada
waktu tertentu di masa yang akan datang.
• Future value diperoleh dengan menerapkan compound
interest selama periode tertentu.
• Compound interest adalah interest yang diperoleh sejumlah
deposit dan menjadi bagian dari principal pada akhir periode
tertentu.
• Principal adalah sejumlah uang dari mana interest dihitung.
 Personal Finance Example
If Fred Moreno places $100 in a savings account
paying 8% interest compounded annually, how
much will he have at the end of 1 year?
Future value at end of year 1 = $100  (1 + 0.08) = $108
If Fred were to leave this money in the account for
another year, how much would he have at the end
of the second year?

Future value at end of year 2= $100  (1 + 0.08)  (1 + 0.08)

= $116.64
 Future Value of a Single Amount:
The Equation for Future Value
• Dengan menggunakan berbagai notasi berikut ini:
– FVn = future value at the end of period n
– PV = initial principal, or present value
– r = annual rate of interest paid. (Note: On financial
calculators, I is typically used to represent this rate.)
– n = number of periods (typically years) that the money
is left on deposit
• General equation untuk future value pada akhir
periode ke - n adalah:
FVn = PV  (1 + r)n
 Future Value of a Single Amount: The
Equation for Future Value
Jane Farber places $800 in a savings account paying 6%
interest compounded annually. She wants to know how much
money will be in the account at the end of five years.
FV5 = $800  (1 + 0.06)5 = $800  (1.33823) = $1,070.58

This analysis can be depicted on a time line as follows:

 Figure 5.4
Future Value Relationship
 Present Value of a Single Amount
• Present value (PV) adalah nilai rupiah/dollar sekarang
yang akan diterima di masa yang akan datang.
• Satu rupiah/dollar hari ini lebih berharga daripada satu
rupiah/dollar besok.
• Discounting cash flows adalah proses untuk
mendapatkan nilai present values; merupakan
kebalikan dari compounding interest.
• Discount rate yang digunakan untuk menghitung PV,
juga sering disebut sebagai the opportunity cost, the
discount rate, the required return, or the cost of
capital.
 Personal Finance Example
Paul Shorter has an opportunity to receive $300
one year from now (FV). If he can earn 6% on his
investments, what is the most he should pay
now for this opportunity?
Remember that: FVn = PV  (1 + r)n
$300 = PV  (1 + 0.06)

PV = $300/(1 + 0.06) = $283.02

 Present Value of a Single Amount:
The Equation for Present Value
The present value, PV, of some future amount,
FVn, to be received n periods from now,
assuming an interest rate (or opportunity cost)
of r, is calculated as follows:
 Present Value of a Single Amount
Pam Valenti wishes to find the present value of
$1,700 that will be received 8 years (n) from
now (FV). Pam’s opportunity cost is 8% (r).
PV = $1,700/(1 + 0.08)8 = $1,700/1.85093 =
$918.46
This analysis can be depicted on a time line as
follows:
 Figure 5.5
Present Value Relationship
 Annuities
• Annuities adalah suatu seri arus kas masuk atau arus
keluar yang sama besarnya
• An ordinary (deferred) annuity adalah arus kas yang
terjadinya pada setiap akhir periode.
• An annuity due adalah arus kas yang terjadinya pada
setiap awal periode.
• An annuity due akan selalu lebih besar daripada an
ordinary annuity karena interest akan dimajemukkan
dalam periode yang lebih panjang.
 Personal Finance Example
Fran Abrams is choosing which of two annuities to
receive. Both are 5-year $1,000 annuities; annuity
A is an ordinary annuity, and annuity B is an
annuity due. Fran has listed the cash flows for both
annuities as shown in Table 5.1 on the following
slide.
Note that the amount of both annuities total $5,000.
Table 5.1 Comparison of Ordinary Annuity and
Annuity Due Cash Flows ($1,000, 5 Years)
 Finding the Future Value of an
Ordinary Annuity
• The future value of an ordinary annuity dari
sejumlah arus kas (cash flow) tahunan sebesar
CF dapat dihitung dg persamaan berikut ini:

• r = interest rate, dan n = jumlah tahun (series)

dari annuity.
 Personal Finance Example
Fran Abrams wishes to determine how much money she will have
at the end of 5 years if he chooses annuity A (Table 5.1), the
ordinary annuity and it earns 7% annually. Annuity A is depicted
graphically below:

This analysis can be depicted on a time line as follows:

 Finding the Present Value of an
Ordinary Annuity
• The present value of an ordinary annuity dari
sejumlah arus kas (cash flow) tahunan sebesar
CF dapat dihitung dg persamaan berikut ini:

• r = interest rate, dan n = jumlah tahun (series)

dari annuity.
 Finding the Present Value of an
Ordinary Annuity (cont.)
Braden Company, a small producer of plastic toys,
wants to determine the most it should pay to purchase
a particular annuity. The annuity consists of cash flows
of $700 at the end of each year for 5 years. The firm
requires the annuity to provide a minimum return of
8%.
CF = $700; n = 5 years; r = 0.08:
PV = $700/0.08 x { 1 – 1/(1+0.08)⁵} = $2,794.90
 Finding the Present Value of an
Ordinary Annuity (cont.)
• This situation can be depicted on a time line
as follows:
Table 5.2 Long Method for Finding the
Present Value of an Ordinary Annuity
 Finding the Future Value of an
Annuity Due
• The future value of an annuity due dari
sejumlah arus kas (cash flow) tahunan sebesar
CF dapat dihitung dg persamaan berikut ini:

• r = interest rate, dan n = jumlah tahun (series)

dari annuity.
 Personal Finance Example
Fran Abrams now wishes to choose between an
ordinary annuity and an annuity due, both offering
similar terms except the timing of cash flows. We have
already calculated the value of the ordinary annuity,
but need to calculate the value of an annuity due.

Future value of ordinary Future value of annuity

annuity due
$5,705.74 $6,153.29

The future value of an annuity due is always

higher than the future value of an ordinary
annuity.
 Finding the Present Value of an
Annuity Due
• The present value of an annuity due dari
sejumlah arus kas (cash flow) tahunan sebesar
CF dapat dihitung dg persamaan berikut ini :

• r = interest rate, dan n = jumlah tahun (series)

dari annuity.
 Finding the Present Value of a
Perpetuity
• A perpetuity adalah anuitas dengan infinite life, yang
memberikan continues annual cash flow.
• Jika sebuah perpetuity memberikan annual cash flow
sebesar CF, dimulai satu tahun dari sekarang, maka
present value dari cash flow adalah:

PV = CF ÷ r
 Personal Finance Example
Ross Clark wishes to endow a chair in finance at his
alma mater. The university indicated that it requires
$200,000 per year to support the chair, and the
endowment would earn 10% per year. To determine
the amount Ross must give the university to fund the
chair, we must determine the present value of a
$200,000 perpetuity discounted at 10%.

PV = $200,000 ÷ 0.10 = $2,000,000

 Future Value of a Mixed Stream
Shrell Industries, a cabinet manufacturer, expects
to receive the following mixed stream of cash
flows over the next 5 years from one of its small
customers.
 Future Value of a Mixed Stream
If the firm expects to earn at least 8% on its
investments, how much will it accumulate by the end
of year 5 if it immediately invests these cash flows
when they are received?
This situation is depicted on the following time line.
 Present Value of a Mixed Stream
Frey Company, a shoe manufacturer, has been offered
an opportunity to receive the following mixed stream
of cash flows over the next 5 years.
 Present Value of a Mixed Stream
If the firm must earn at least 9% on its
investments, what is the most it should pay for
this opportunity?
This situation is depicted on the following time
line.
 Compounding Interest More
Frequently Than Annually
• Compounding more frequently than once a year
results in a higher effective interest rate because
you are earning on interest on interest more
frequently.
• As a result, the effective interest rate is greater
than the nominal (annual) interest rate.
• Furthermore, the effective rate of interest will
increase the more frequently interest is
compounded.
 Compounding Interest More Frequently
Than Annually (cont.)
A general equation for compounding more frequently than
annually

m = frekwensi pemajemukan; n = periode

Berapa Future Value dari investasi sebesar $100 dengan
tingkat bunga 8% per tahun pada akhir tahun kedua
dengan asumsi: (1) semiannual compounding dan (2)
quarterly compounding.
 Compounding Interest More
Frequently Than Annually (cont.)
PV = $ 100; r = 0.08; n = 2
Compounding Semiannualy - m = 2
Compounding Quarterly - m = 4