What concept determines the value of an asset over time?

The concept that determines the value of an asset over time is the time value of money. This principle is fundamental in finance and real estate, emphasizing that money available today is worth more than the same amount in the future due to its potential earning capacity. This concept is rooted in the idea that money can earn interest, so any amount of money is worth more the sooner it is received.

The time value of money accounts for inflation, risk, and the potential opportunity to invest. It helps assess investment viability, guiding decisions for real estate purchases and other financial investments.

Understanding this principle is critical for evaluating future cash flows, comparing investment opportunities, and making informed financial decisions over time. Hence, it provides the foundational basis for calculating present and future values, but more broadly reflects how time impacts the overall worth of money itself.