Week 3: Dialogue
We use the time value of money in finance to help us value assets used business or investments made. What are the factors used in computing the present value of cash flows? In Leviticus 25 tells us how should one value the sale of land to others. In an initial post of 300 words or less, discuss how this parable relates to the time value of money this week.
Support your post with two scholarly journal references from outside sources and/or Regent University database.
Reply supporting or challenging their beliefs.
Reply to two students and use your research to add to or challenge the findings of your peers. Support your responses with at least one peer-reviewed scholarly journal reference.
Above is our original post that we had to answer that I have done. Below is one of my fellow students post that I need to respond to in 200-250 words in APA format with correct citing.
One crucial aspect of financial management is the estimation of present value versus future value – this takes into account that over time, due to inflation and depreciation, assets will lose value. Specifically, present value in cash flow is determined by the valuation of financial asset and the required rate of return by the lenders. For example, in contemplation of the present value of the housing market, long-run estimations should be taken into account such as present tax rates and fixed borrowing costs versus inflation, market depreciation, oscillating tax brackets and high transactional costs (1994). These must be taken into serious consideration when evaluating the present value versus the future value of a home investment.
The example in Leviticus offers some great insight to a biblical perspective on present value. Specifically, chapter 25 address the Sabbath Year and the Year of Jubilee. Here, God strictly forbids that the assets (of the crops in the field) be used for profitable means. Instead, it is meant to be for personal consumption. Additionally, the Year of Jubilee declared that all debts incurred would be released after 49 years. Everything was based on the 49-year collection cycle (Mills 2000). Present value (the price of land) was based on this – if land was sold right after Jubilee, it would be worth more than land sold nearer to the next Jubilee. Interestingly as well, the land sold was to be returned back to the owners – everyone was to return to their original family’s land. Leviticus eliminated the freehold sale of agricultural land and the interest-bearing loan. This was possible because private property rights did not exist – God owned the land and the Israelites were merely custodians of it (vs 23). This is a completely different approach to assessing present value and remains in stark contrast to today’s housing market.
Meese, Richard. (1994). Testing the Present Value Relation. Journal of Urban Economics. Vol 35, Issue 3. Web.
Mills, Paul. (2000). The Divine Economy. Jubliee Center. December Issue. Web.
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