Example of Time Value of Money

Time value of money is calculated by measuring costs of periods of time based on the net costs incurred during that period. This method is used to establish a real cost base for business operations and a general basis for quotes for services. The process is sometimes a debatable measure of cost in terms of describing costs of operations when these costs are normal costs, regardless of operational conditions.

Period of time: 5 hours

Cost of staff = $500 per hour              $2500

Cost of office space = $20 per hour      $100

Cost of equipment usage = $80 per hour    $400

Cost of consultant per hour = $85 per hour  $ 425

Net time value of money        $3425