Module 1 – Time Value of Money
One of the most basic (and important) concepts in investment analysis is the time value of money. It forms the foundation of financial literacy and is the basis for understanding valuation and investments.

Warren Buffett, one of the greatest investors of all-time, is a great believer in the time value of money, preferring to reinvest money generated from the businesses rather than paying dividends to its shareholders. This way, the money can continue to grow. As such, the value of his investments will compound over time, very much like how bacteria would multiply and as a result, the future returns would be very much higher. This, is the power of time value of money.

When Buffett took the helm of his investment company, Bershire Hathaway in 1964, its book value was only $19.46 and its intrinsic value much lower. Today, its book value per share is more than $20,000 and its intrinsic value far higher. The growth rate in its book value per share during this period is in excess of 25% compounded annually. Anyone who had bought shares in Bershire in 1964 would be a very wealthy man today!

In this module, the concept of time value of money will be explained and illustrated through the use of various examples.