Time Value of Money: Calculation of PV with Complex Cash Flows
Time Value of Money:
Calculation of PV with Complex Cash Flows
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0:40 – Principles of Discounting Cash Flows
2:18 – Calculation example: Cash flows without repetition
4:35 – Calculation example: Partial Repetition of Cash Flows
7:20 – Conclusion
In many cases, the cash flows that are created resulting from a project or investment are not constant and the previously defined methods are not applicable.
When we have variable cash flows, they may all be variable or there may be a sequence with constant cash flows.
In the first case, each cash flow has to be discounted manually using the general discounting formula and adding all the discounted cash flows, that will give us the Present Value
On the other hand, in some cases, there may be a series of repeating cash flows. In this case, we can use the formula on these repeating cash flows and then further discount the result and do the same for the other cash flows.
Later we will see a different way to calculate the PV of a series of cash flows. This formula will be based on the formula for the Net Present Value, but we will discuss that in the following videos.
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