Time value of money
The New Rules of Measurement (NRM) are published by the Royal Institute of Chartered Surveyors (RICS). They provide a standard set of measurement rules for estimating, cost planning, procurement and whole-life costing for construction projects.
NRM3: Order of cost estimating and cost planning for building maintenance works, defines ‘time value of money’ as:
…the measurement of the difference between future monies and the present day value of monies. |
It suggests that:
The present value (PV) concept captures the time value of money by making adjustments through compounding and discounting cash flows to reflect the increase in costs due to inflation and the increased value of money when invested. The PV of a cash flow reflects, in today’s terms, the value of future cash flows adjusted for the cost of capital. In essence, the time value of money reflects the fact that money in hand today is more valuable than an identical amount of money received in the future. Since money today can earn interest, all costs must be adjusted to reflect the inflation rate and then discounted to reflect the effect of interest rates on their PV. |
More detailed guidance is provided in Appendix G of NRM3.
[edit] Find out more
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Listed despite problems with its design.
Zen and the art of cycling exploration.
Design Council Homes Taskforce launched
To support government 1.5 million homes target within UK climate commitments.
The story of this knowledge quarter building.
In ecology, in hydrology, in biology and in architecture.
Creating environments that promote physical, mental, and social well-being.
UK cases of neutral current diversion
Research project looks for example contributions.
Overstocking and macro-economics cause a decline.
The 2024 update of the Common Assessment Standard
Demonstrating organisational capability’ to fulfil roles under the Building Safety Act.
56 recommendations for a better built environment
Published by the CIC ahead of the King’s Speech.
SkillELECTRIC Top 8 Competitors Named
in annual search for the UK’s best student electrician.
CIOB Diversity and Inclusion technical information sheet
Step-by-step guide on implementing D and I practices.
Conservation and the Indian City. Book review.
Reversibility in conservation ethics
Learning from painting conservation.
Where It's AT Podcast launched!
New CIAT Architectural Technology Podcast goes live.