The concept of time value of money indicates that a Rs 100 note today is worth more than the Rs 100 note in a future date. This is because; money can be invested and can make a return. For example, Rs 100 saved in the bank today will earn Rs 10 in the form of rate of interest (if the interest rate is 10%) and will become Rs 110 tomorrow. Here, Rs 100 today became equal to Rs 110 in one year later.
The basic idea behind time value of money is that money today has to ability to add more if it is invested.
