Time Value

  • Bruce Hannon
  • Matthias Ruth

Abstract

As we mentioned in Chapter 21, firms make their decisions not just with regard to the production possibilities and demand at the present period of time, but they also attempt to optimize their activities over a longer time horizon. How can these firms compare profits that occur at different periods of time? Having a dollar today is surely different from having a dollar next year. To compare profits that accrue at different time periods, we may calculate their present value rather than their current value. In this chapter we take up the issue of present versus current value in more detail and provide the tools that are necessary in the following chapters to assess the optimal behavior of firms over time.

Keywords

Sine 

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Copyright information

© Springer Science+Business Media New York 1994

Authors and Affiliations

  • Bruce Hannon
    • 1
  • Matthias Ruth
    • 2
  1. 1.Department of GeographyUniversity of IllinoisUrbanaUSA
  2. 2.Center for Energy and Environmental StudiesBoston UniversityBostonUSA

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