The concept of time value of money is best explained in a simple way: a dollar today is worth more than a dollar in the future.
Imagine receiving $1,000 today and putting it in a simple bank savings account. That $1,000 will eventually grow over the years because the bank will pay interest on it. Thus, there is a greater benefit to getting the $1,000 now rather than later. If the amount is to be received later, it would be necessary to ask for more than $1,000 to compensate for the interest that could have been earned had the money been received today.
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