Week 3: Dialogue

We use the time value of money in finance to help us value assets used business or investments made. What are the factors used in computing the present value of cash flows? In Leviticus 25 tells us how should one value the sale of land to others. In an initial post of 300 words or less, discuss how this parable relates to the time value of money this week.

Support your post with two scholarly journal references from outside sources and/or Regent University database.

Reply supporting or challenging their beliefs.

Reply to two students and use your research to add to or challenge the findings of your peers. Support your responses with at least one peer-reviewed scholarly journal reference.

Above is our original post that we had to answer that I have done. Below is one of my fellow students post that I need to respond to in 200-250 words in APA format with correct citing.

In order to understand present value, you need to understand how you calculate future value, I like to think of it as a projected future value. This is helpful when you would like to know how much your money will be worth in one year, in two years or in three years. You can also think of it as wanting to know how much your money will pay you in option one, option two or option three and so on. When you are looking at a present value of $100. and your present value is %10 of $100. You are looking at the (FV) Future value of $110.

In order to determine the present value, you will need to look backwards from the future value and determine the present value based upon the percent increase given. When you look at the Future value you are taking the %10 and “discounting the rate” to get the present value. You can determine both present value and future value by reversing the process (Block, p. 260).

The Parable of Leviticus 25:15, “According to the multitude of years you shall increase its price, and according to the fewer number of years you shall diminish its price; for he sells to you according to the number of years of the crops” (NLT). According to this scripture in Leviticus, it seems that what is being described is present value and when the scripture refers to the fewer number of years it is talking about diminishing in price. This represents discounting the rate from the future value to the present value. “Present value tells us how much a future sum of money is worth today, given a specified rate of return. This is an important financial concept based on the principle that money received in the future is not worth as much as an equal sum received today” (Catham, p.1). Neuwirth shares a story about a property that he and his wife bought early on in their marriage. He illustrates the point of future investment, although when they purchased the property they were not thinking about the future value of the property. He and his wife soon begin to dismantle the old stables and structures put in place for the once farm property and begin to plan for the future, and also the future investment. Neuwirth writes “it has caused us to think hard about that distant future and make choices that go beyond those where money doesn’t matter, we are not even the ones who will face their consequences” (Neuwirth, p. 102). This quote is referring to the future of what Peter and his wife chose to do with the property. They chose to design an orchard that will carry a value far into the future and surpass their own lives, something that is beyond money.

References

Neuwirth, Peter. What’s your future worth? :using present value to make better decisions. (2015). Barrett-Koehler.

Investopedia stock analysis: What is present value? (2015). Chatham: Newstex