What is the time value of money principle and how does it apply to project selection?

What will be an ideal response?

The time value of money principle suggests that money earned today is worth more than money expected in the future. Future money is expected to be worth less for two reasons: (1 ) the impact of inflation, and (2 ) the inability to invest the money. The time value of money principle may be applied to project selection as one criterion to ascertain which project will generate the greatest return on a company's investment. Projects that have a relatively certain return of greater sums of money would be preferred over projects that stand a chance of returning less money in today's dollars.