12 a conventional cash flow pattern that provides

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Unformatted text preview: nuity) of $2,000 each year for the next 8 years, as depicted on the time line in Figure 8.1.2 A conventional cash flow pattern that provides unequal annual cash inflows is depicted in Figure 8.3 on page 361. A nonconventional cash flow pattern is one in which an initial outflow is followed by a series of inflows and outflows. For example, the purchase of a machine FIGURE 8.1 Conventional Cash Flow Time line for a conventional cash flow pattern $2,000 $2,000 Cash Inflows $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 0 Cash Outflows 1 2 3 4 5 6 7 8 $10,000 End of Year 2. Arrows rather than plus or minus signs are frequently used on time lines to distinguish between cash inflows and cash outflows. Upward-pointing arrows represent cash inflows (positive cash flows), and downward-pointing arrows represent cash outflows (negative cash flows). 360 PART 3 Long-Term Investment Decisions FIGURE 8.2 Nonconventional Cash Flow Time line for a nonconventional cash flow pattern $5,000 $5,000 $5,000 $5,000 Cash Inflows 0 Cash Outflows $5,000 $5,000 $5,000 $5,000 $5,000 5 1 2 3 4 $20,000 6 7 8 9 10 $8,000 End of Year may require an initial cash outflow of $20,000 and may g...
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