Time Value of Money
Kinds of Interest Rates
Future Value of an Uneven Cash flow
Security Market Line
Cost of Capital
The Balance Sheet
Hall of Fame
Future Value of an Uneven Cashflow
Lets say, for example that for the next 4 years you will get the following cash flow.
If you assume that the interest rate is 6.5% (which means that after you get the money, it will be invested and you will get 6.5% interest from it), compounded monthly, how much money will you have in 4 years? In other words, what will the future value of this cash flow be?
So you have to figure out the future value of each payment and then add them together.
Fourth Payment - ( The payment is not compounded. There no time to earn interest)
Finally, add up all the numbers
So after 4 years, you will have $1,837.59. That is the future value of your uneven cash flow.
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