CHAPTER 4 - TIME VALUE OF MONEY 1: ANALYZING SINGLE CASH FLOWS

Questions

LG11. List and describe the purpose of each part of a time line with an initial cash inflow and a future cash outflow. Which cash flows should be negative and which positive? Why?

The cash flow timeline is a visual depiction of inflows and outflows relative to the period under consideration. Cash flows are illustrated above the cash flow line with the corresponding periods that apply appearing under the cash flow diagram. Inflows are represented by positive numbers and outflows by negative numbers.

LG22. How are the present value and future value related?

The measure that relates present values to future values is the interest rate i. A present value can be moved forward in time with interest to arrive...