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ISE2014_Class6

ISE2014_Class6 - Class 6 ISE 2014 Click to edit Master...

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Click to edit Master subtitle style Class 6 ISE 2014 Fall 2010

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Your Toolbox Cash Flow Diagrams F/P P/F P/A
Last Class We learned that we could use the output from one tool as the input for another tool No matter how many times we apply more tools, the output is still equivalent to the original In practice do this by multiplying by an additional tool each time

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Last Class We could start with a \$1000 cash flow in year 0 Move it to year 10 with (F/P,i%,10) Convert it to an annuity on years 11-15 with (A/P,i%,5) 1 5 1 4 1 3 1 2 1 1 1 0 0 1 2 \$100 0 X 1 0 X11 -15
Last Class X11-15 = \$1000(F/P,i%,10)(A/P,i%,5) The way our tools are designed, we can continue manipulating the same cash flow just by multiplying by more tools X1 0

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Adding Complexity Lets continue adding complexity and practicing with our tools The positive or negative direction of cash flow is now going to matter, so be careful how you draw diagrams We’ve learned how to manipulate one cash flow multiple times, now let’s see how to combine multiple cash flows into one
What is the present value equivalent (X0) of the following cash flows? 0 1

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ISE2014_Class6 - Class 6 ISE 2014 Click to edit Master...

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