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. 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:

• \( PV \) — Present Value
• \( CF_i \) — Cash Flow at period i
• \( r \) — Discount rate per period (decimal)
• \( i \) — Period number
• \( n \) — Total number of periods

Explanation: The formula discounts each future cash flow back to the present using the discount rate, then sums all these present values.

3. Importance of PV Calculation

Details: Calculating present value of uneven cash flows is essential for investment analysis, capital budgeting, and financial decision making when cash flows are irregular.

4. Using the Calculator

Tips: Enter the discount rate as a percentage (e.g., 5 for 5%), the number of periods, and each cash flow amount. The calculator will dynamically add fields for each period's cash flow.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between PV of uneven vs. even cash flows?
A: Even cash flows (annuities) use a simplified formula since all CF_i are equal. Uneven cash flows require calculating each period separately.

Q2: How does the discount rate affect PV?
A: Higher discount rates reduce present value more significantly, especially for cash flows further in the future.

Q3: Can I use this for monthly cash flows?
A: Yes, but ensure your discount rate matches the period (use monthly rate for monthly cash flows).

Q4: What if I have cash flows beyond the calculator's limit?
A: For very large numbers of periods, consider using spreadsheet software or programming the calculation.

Q5: How accurate is this calculation?
A: The calculation is mathematically precise, but accuracy depends on the reliability of your cash flow estimates and discount rate.