Chapter04

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Unformatted text preview: –4, respectively? 4–10 What is a perpetuity? How can the present value interest factor for such a stream of cash flows be determined? LG4 mixed stream A stream of unequal periodic cash flows that reflect no particular pattern. Mixed Streams Two basic types of cash flow streams are possible: the annuity and the mixed stream. Whereas an annuity is a pattern of equal periodic cash flows, a mixed stream is a stream of unequal periodic cash flows that reflect no particular pattern. Financial managers frequently need to evaluate opportunities that are expected to provide mixed streams of cash flows. Here we consider both the future value and the present value of mixed streams. Future Value of a Mixed Stream Determining the future value of a mixed stream of cash flows is straightforward. We determine the future value of each cash flow at the specified future date and then add all the individual future values to find the total future value. EXAMPLE Shrell Industries, a cabinet manufacturer, expects to receive the following mixed stream of cash flows over the next 5 years from one of its small customers. End of year Cash flow...
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This document was uploaded on 03/03/2014 for the course MBA BMMF at Open University Malaysia.

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