Present Value of Cash Flows
In financial analysis, we often come across uneven cash flow streams. Like, the cash flow stream associated with a capital investment project is typically uneven. As, the dividend stream associated with an equity share is usually uneven and perhaps growing.
present value of cash flows. cash flow formula. discounted cash flow analysis. present value of future cash flow. cash flow diagram calculate present value of cash flows formula stream.
present value of cash flows. cash flow formula. discounted cash flow analysis. present value of future cash flow. cash flow diagram calculate present value of cash flows formula stream.
Cash Flow Formula
The present value of a cash flow stream both uneven or even can be calculated with the help of the following cash flow formula:
present value of cash flows. cash flow formula. discounted cash flow analysis. present value of future cash flow. cash flow diagram calculate present value of cash flows formula stream.
present value of cash flows. cash flow formula. discounted cash flow analysis. present value of future cash flow. cash flow diagram calculate present value of cash flows formula stream.
PV_{n}=A_{1}/(1+r) +A_{2}/(1+r)^{2 }+A_{3}/(1+r)^{3}+……+A_{n}/(1+r)^n
So the present value of a cash flow stream is,
PV_{n}=∑ A_{t}/(1+r)^{t}
where
PV_{n} = present value of a cash flow stream
A_{t} = cash flow occurring at the end of year t
r = discount rate
t = duration of the cash flow stream present value of cash flows. cash flow formula. discounted cash flow analysis. present value of future cash flow. cash flow diagram calculate present value of cash flows formula stream.
Following Table shows the calculation of the present value of an uneven cash flow stream, using a discount rate of 12%
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year

cash flow

PVIF12% n

present value of individual cash flow 
1

1000

0.893

893

2

2000

0.797

1594

3

2000

0.712

1424

4

3000

0.636

1908

5

3000

0.567

1701

6

4000

0.507

2028

7

4000

0.452

1808

8

5000

0.404

2020

Total=13376

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Present VAlue of Cash Flow
present value of cash flows. cash flow formula. discounted cash flow analysis. present value of future cash flow. cash flow diagram calculate present value of cash flows formula stream.
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