Time value and purchasing power

Money's temporal value is also affected by inflation

and procurement power difficulties. Both concerns and
the expected rate of return on investment must be
taken into account.

What difference does it make? Because money's

worth, and thus its purchasing power, is always
diminishing due to inflation. The cost of items such as
gasoline and groceries are best displayed. If you
obtained a $100 free gasoline coupon in 1990, for
example, you may have purchased more gasoline
gallons than if you received a $100 free gasoline
coupon 10 years later.
Inflation and purchasing power must be considered
while investing money, since you must subtract your
inflation rate from whatever percentage return you
receive from your money to establish your genuine
return on investment. Even though your investment is
nominally positive, you will lose money in terms of
purchasing power if the rate of inflation exceeds the
rate of your return. For example, if you invest 10% of
your income but the inflation rate is 15%, you will lose
5% of your purchasing power each year (10% – 15% =
5%).
Time value of money formula