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THE LAN`E TIME DOES NOT COME BACK

Time to value (TTV) is similar to return on investment (ROI), but instead of realizing the financial success of an investment, it implies achieving the effectiveness of an investment. This is applied mostly to added technology — data center hardware, network infrastructure, system security, etc. whereby the promised improvement becomes measurable. It can even be argued that in cases such as data security, TTV is more important than ROI since the security may only have financial benefits in banking and commercial industries, but has value — the protection of personal and/or corporate data — in every industry

Purpose

The time to value (TTV) measures the length of time necessary to finish a project and realize the benefits of the solution. The concept is used to help decision makers evaluate the proposed benefit of an investment in time and/or money

Limitation

While the concept is easy to understand and explain to management or investors, the problem is that "completion", "benefit", and "value" are not as easy to define, can change over time, and the technology may even obsolesce before the installation is completed.

References

1.  Kolsky, Esteban. "Ruminations on ROI vs TTV". estebankolsky.com. Retrieved 19 December 2017.
2. ^ George Pitagorsky. "Time-to-Value and the Value of Time". PMtimes.

This finance-related article is a stub. You can help Wikipedia by expanding it. Time Value of Money What is the Time Value of Money - TVM The time value of money (TVM) is the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. TVM is also sometimes referred to as present discounted value. BREAKING DOWN Time Value of Money - TVM The time value of money draws from the idea that rational investors prefer to receive money today rather than the same amount of money in the future because of money's potential to grow in value over a given period of time. For example, money deposited into a savings account earns a certain interest rate, and is therefore said to be compounding in value.  Further illustrating the rational investor's preference, assume you have the option to choose between receiving $10,000 now versus $10,000 in two years. It's reasonable to assume most people would choose the first option. Despite the equal value at time of disbursement, receiving the $10,000 today has more value and utility to the beneficiary than receiving it in the future due to the opportunity costs associated with the wait. Such opportunity costs could include the potential gain on interest were that money received today and held in a savings account for two years. Basic Time Value of Money Formula Depending on the exact situation in question, the TVM formula may change slightly. For example, in the case of annuity or perpetuity payments, the generalized formula has additional or less factors. But in general, the most fundamental TVM formula takes into account the following variables: FV = Future value of money PV = Present value of money i = interest rate n = number of compounding periods per year t = number of years Based on these variables, the formula for TVM is: FV = PV x [ 1 + (i / n) ] (n x t) Time Value of Money Example Assume a sum of $10,000 is invested for one year at 10% interest. The future value of that money is: FV = $10,000 x (1 + (10% / 1) ^ (1 x 1) = $11,000 The formula can also be rearranged to find the value of the future sum in present day dollars. For example, the value of $5,000 one year from today, compounded at 7% interest, is: PV = $5,000 / (1 + (7% / 1) ^ (1 x 1) = $4,673 Effect of Compounding Periods on Future Value The number of compounding periods can have a drastic effect on the TVM calculations. Taking the $10,000 example above, if the number of compounding periods is increased to quarterly, monthly or daily, the ending future value calculations are: Quarterly Compounding: FV = $10,000 x (1 + (10% / 4) ^ (4 x 1) = $11,038 Monthly Compounding: FV = $10,000 x (1 + (10% / 12) ^ (12 x 1) = $11,047 Daily Compounding: FV = $10,000 x (1 + (10% / 365) ^ (365 x 1) = $11,052 This shows TVM depends not only on interest rate and time horizon, but also on how many times the compounding calculations are computed each year. Compare Popular Online Brokers Provider Name Description