Simple Cash Flows

A simple cash flow is a single cash flow in a specified future time period; it can be depicted on a time line in figure 3:

Figure 3: Present Value of a Cash Flow

Cash inflow: CFt

Discounting converts future casfflow into cash flow today where CFt = the cash flow at time t.

This cash flow can be discounted back to the present using a discount rate that reflects the uncertainty of the cash flow. Concurrently, cash flows in the present can be compounded to arrive at an expected future cash flow.

Lessons From The Intelligent Investor

Lessons From The Intelligent Investor

If you're like a lot of people watching the recession unfold, you have likely started to look at your finances under a microscope. Perhaps you have started saving the annual savings rate by people has started to recover a bit.

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