FIN 300 Chapter Notes - Chapter 6: Cash Flow, Photovoltaic System, Compound Interest
Document Summary
Fin 300 chapter 6: discounted cash flow valuation. 6. 1 future & present values of multiple cash flows. In chapter 5, a basic simple cash flow was introduced, but in reality, investments usually consist of multiple cash flows. Drawing a time line is useful to give a visual representation of the cash flows and how they will occur. Two ways to calculate fv for multiple cash flows: compound the accumulated balance forward one year at a time (or, calculate the fv of each cash flow and hen add them up. However, this gets difficult for more complicated questions. Two ways to calculate pv for multiple cash flows: discount back one period at a time (or, calculate the pv individually and add them up. The pv of a series of future cash flows is simply the amount that you would need today in order to exactly duplicate those future cash flows (for a discount rate).
