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PRINCIPLES OF VALUATION

Because rational people prefer to receive benefits sooner than later and make sacrifices later than sooner, money, which provides the option to buy benefits, is likewise preferred sooner to later.

If an individual prefers money sooner than later, then he/she values a dollar today more than a dollar tomorrow or a dollar in one year from now. A dollar today is worth a dollar today: therefore, a dollar next year must be worth less than a dollar today since it is less preferable/valuable.

In other words, the same amount of money will be more or less valuable depending upon when it is received. What would you prefer, $100 today or $100 in one year from today? Most people prefer $100 today since it gives them the option to spend it today or save it and spend it in one year. Receiving $100 in one year doesn't allow for $100 in consumption today.

For equal amounts of money, the decision when to take money --today or in the future-- is an easy one: sooner......

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Approximate Word Count: 692
Approximate Pages: 3 (250 words per double-spaced page)

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