ABSTRACT
The ability to calculate capital-values is essential to the making of financial investment decisions, without which no modern economy could exist. The authors use an understanding of capital that is consistent with the following definition by Ludwig von Mises: Capital is the sum of the money equivalent of all assets minus the sum of the money equivalent of all liabilities as dedicated at a definite date to the conduct of the operations of a definite business unit. Capital is the source of all income in the sense that in conceiving of the value of all types of productive resources we are attributing to those resources the ability, when combined in specific ways, to produce a flow of valuable services, which is income. The time-value of money provides a framework, a set of tools, to take account of the fact that individuals do not value incomes received at different points in time equally.
