THE TIME VALUE OF MONEY
3-1 Introduction to the time value of money
3-2 Future value of a lump sum received today
3-3 Present value of a lump sum received in the future
3-4 Additional applications involving Lump sums
3-5 Future value of cash flow streams
3-6 Present value of cash flow streams
3-7 Advanced applications of time value
Bring your learning to life with interactive learning, study, and exam preparation tools that support the printed
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In March 2008, Meyrick and Associates, a consulting
group, together with EconSearch and Steer Davies
Gleave, presented a report on a range of transport
options for the East–West Link to the Victorian
State Government. The East–West Link was a
planned major infrastructure project that would
affect transport and traffic patterns for millions of
people who live and work in the city of Melbourne
over many decades. The report summarised
extensive analyses undertaken to evaluate the
benefits and costs of the base case and the various
other options for developing this new piece of
transport infrastructure, and described a series
of present values that had been determined. For
example, one piece of analysis was of the present
value of public transport revenue accrued by each
option. It was determined by:1 Estimating revenue per day for the base case
and for each option.
2 Estimating revenue per year for each option.
3 Discounting the future cash flows.
4 Estimating the yearly increase of revenue for
each option.
5 Calculating the difference between the base
case and each other option.
The project received considerable public attention,
especially when, following a 2014 election and
change of government, it was revealed that the initial
business case for the project predicted a loss of
45 cents for every dollar invested. Further analyses
were conducted to incorporate wider economic benefits
stemming from the project, including reduced travel
and commercial times; but the return from the project
increased only to 84 cents for each dollar invested.
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