1. What is Present Value of Uneven Cash Flows?

The present value of uneven cash flows calculates the current worth of future cash flows that are not equal in amount. This is common in real-world financial scenarios where payments or receipts vary over time.

2. How Does the Calculator Work?

The calculator uses the present value formula for uneven cash flows:

Where:

• \( CF_t \) — Cash flow at time period t
• \( r \) — Discount rate per period (as decimal)
• \( t \) — Time period when cash flow occurs

Explanation: The formula discounts each future cash flow back to the present using the time value of money principle, then sums all discounted values.

3. Importance of Present Value Calculation

Details: Calculating present value helps in investment analysis, capital budgeting, and financial decision making by allowing comparison of cash flows occurring at different times.

4. Using the Calculator

Tips: Enter cash flows as comma-separated values (e.g., 100,200,300), discount rate as decimal (e.g., 0.05 for 5%), and corresponding time periods (e.g., 1,2,3). All values must be valid.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between uneven and annuity cash flows?
A: Uneven cash flows vary in amount each period, while annuities have equal periodic payments.

Q2: How does discount rate affect present value?
A: Higher discount rates result in lower present values as future cash flows are discounted more heavily.

Q3: What if cash flows and periods arrays are different lengths?
A: The calculator requires matching lengths - each cash flow must have a corresponding time period.

Q4: Can I use this for monthly cash flows?
A: Yes, but ensure the discount rate matches the period (use monthly rate for monthly cash flows).

Q5: What are common applications of this calculation?
A: Valuing irregular income streams, analyzing investment projects, evaluating bond prices with varying coupons.