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    Unequal cash flows affect the future value of an investment

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    How do unequal cash flows affect the future value of an investment?

    Please explain in detail.

    Please support answer with a minimum of three quality academic and/or industry references.

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    The Financial Times
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    Solution Preview

    How do unequal cash flows affect the future value of an investment?

    The future value of an investment is determined by discounting the present value of cash and therefore unequal cash flows will affect future valuation. Returns from investments do not always occur at single intervals and the amount may differ and this will affect valuation. The foundation of time value of money is based on the argument that money has different values over a time period thus discounting methods are used to determine the time value of money. The future value of an investment is determined by determining the total value of cash flow at a specified future period.

    Hinson (1975) provides that the time relevance of capital assets or investments is reduced by cash generated since cash is regarded as recapturing costs. The cash is made available for other future investments and this can be termed as recycling of funds and this result in one generation of capital assets relatively independent of interest rate conditions within a ...

    Solution Summary

    The unequal cash flows which affect the future value of an investment is determined.

    $2.19