14 Questions to Introduce Present Value
When I talk with financial accounting teachers, the topic of present value will eventually come up. Teachers are often puzzled by how much they should cover. Some teachers tell me they skip present value entirely whereas others let me know that they believe extensive coverage is necessary. What does a sophomore in an introductory financial accounting class need to know about present value? What can they really understand? I find that if I throw terms like “discounted cash flows” and “the time value of money” at my sophomores, they quickly become lost. What seems crystal clear to me as the teacher can be puzzling to a young student. However, if students are going to take other business courses or other accounting courses, they need to have some basic understanding of present value concepts. So, yesterday, in my classes here at the University of Richmond, we began to examine present value. I did this by looking asking them the following series of questions: 1 – What is in...