The time value of money is a fundamental concept in finance that recognizes the fact that money today is worth more than the same amount of money in the future. This is because money today can be invested and earn interest or returns, which will increase its value over time. Therefore, a dollar received today is worth more than a dollar received in the future.

The significance of the time value of money is that it is a critical factor in making financial decisions. It is used to calculate the present value of future cash flows, which is essential in determining the value of investments, loans, and other financial instruments. By understanding the time value of money, individuals and businesses can make informed decisions about how to allocate their resources and invest their money.

For example, in the case of Naresh Jain, he needed to consider the time value of money when deciding whether to buy or rent an apartment. He had to calculate the present value of the future cash flows associated with each option, taking into account the opportunity cost of investing his money, the interest rate on his loan, and the potential future appreciation of the property. By doing so, he was able to make an informed decision about which option was the most financially beneficial for him.

In summary, the time value of money is a critical concept in finance that helps individuals and businesses make informed decisions about how to allocate their resources and invest their money. By understanding the time value of money, individuals can calculate the present value of future cash flows and make informed decisions about investments, loans, and other financial instruments.