Money received is a

 

 

 

$300

 

 

 

 

 

$250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

positive number

$200

 

 

$200

 

 

 

 

$125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$100

 

 

 

$

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Time

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

periods

1

2

 

3

4

5

 

 

6

 

7

 

8

 

 

 

 

 

_

 

Money paid out

 

 

 

 

 

 

$

50

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

is a negative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

number

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 7-1. Cash Flows (Ungrouped)

The horizontal timeline is divided into equal compounding periods. The vertical lines represent the cash flows. For money received, the line points up (positive); for money paid out, the line points down (negative). In this case, the investor has invested $700. This investment has generated a series of cash flows, starting at the end of the first period. Notice that there is no cash flow (a cash flow of zero) for period five, and that the investor pays a small amount in period six.

„Grouped cash flows. These occur in a series containing “groups” of equal, consecutive flows. Consecutive, equal cash flows are called grouped cash flows. The series shown here is grouped into two sets of consecutive, equal cash flows:

7: Cash Flow Calculations 93

File name : English-M02-1-040308(Print).doc Print data : 2004/3/9