1. What is Present Value of Uneven Cash Flows?

The Present Value (PV) of uneven cash flows calculates the current worth of future cash flows that are not identical in amount, discounted at a specific rate. This is common in investment analysis and capital budgeting.

2. How Does the Calculator Work?

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

Where:

• \( PV \) — Present Value
• \( CF_t \) — Cash flow at time t
• \( r \) — Discount rate per period
• \( t \) — Time period

Explanation: Each cash flow is discounted back to the present using the discount rate, then summed to get the total present value.

3. Importance of PV Calculation

Details: PV calculation helps investors and businesses evaluate investment opportunities, compare projects with different cash flow patterns, and make informed financial decisions.

4. Using the Calculator

Tips: Enter the discount rate as a percentage (e.g., 5 for 5%) and cash flows as comma-separated values (e.g., 100,200,300). The calculator will discount each cash flow based on its position in the sequence.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between PV of uneven vs. even cash flows?
A: Uneven cash flows require discounting each amount separately, while even cash flows (annuities) can use simplified formulas.

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

Q3: What time periods does this assume?
A: The calculator assumes each cash flow occurs at the end of consecutive periods (years by default unless specified otherwise).

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 businesses with irregular earnings, analyzing bond cash flows, evaluating capital projects, and assessing investment opportunities.