Cash Flow Cash flow is a mathematical object that can be represented graphically in order to facilitate the study and

analysis of the effects of a certain appli cation, which can be an investment, loan, financing, etc.. Typically, a cash flo w contains inputs and outputs of capital, given a time line starting at t = 0. A typical example is the chart: And the cash flow of the person 0 1 2 3 ... n-1 n S1 S2 S3 ... Sn-1 Sn that represents a bank installments over the tered the box (the box arcels that will leave k, the arrows have the h Flows of the Person. 0 1 2 3 ... n-1 n The fact that each arrow indicate upward (positive) or down (negative), is assum ed by convention, and cash flow will depend on who receives or pays the capital in a given moment, thus: 1. t = 0 indicates the current day, 2. K indicates the capital input at a time k; Note: In this work, the main point is the constructio n of Cash Flows in graphical form and little attention is given to the problems. If you have some interesting cash flow that is worth being treated, please send your suggestion. 3. Sk indicates the output of capital at a time k. loan made by a person so that she repay the loan in equal n months. We note that Eo is the value that the person en was positive) and S1, S2, ..., Sn are the values of the p the box of the person (negative). In Cash Flow of the ban meanings changed over the directions of the arrows of Cas Thus: Cash Flow E1 E2 E3 bank ... En-1 En

So Further important examples, we present a collection of situations and build the cash flows of the same (from the standpoint of the person). Such situations are very common in financial operations. Solve a few exercises, but those interested should see our course on Financial M athematics, at the same Home Page, where you will find lots of information about it. 1. A person borrowed $ 10,000.00 today and will pay U.S. $ 11,000.00 here a month ago. Cash Flow 10 000 2001 0 1 11 000 2. A person borrowed $ 10,000.00 today and pay in two equal installments and followed by $ 6000.00 as of next month. Cash Flow 10 000 2002 0 1 2 6000 6000 3. A person borrowed $ 10,000.00 today and will pay R $ 5,500.00 in 30 days and R $ 6,500.00 in 60 days. Cash Flow 10 000 2003 0 1 2 5500 6500 4. A person borrowed $ 10,000.00 today and pay $ 1,000.00 in 15 equal installmen ts from next month. Cash Flow 10 000 2004 0 1 2 ... 14 15 1000 1000

1000 1000 1000 5. A person bought a car for U.S. $ 16,000.00 today and pay in 24 installments o f R $ 876.54 from next month. Cash Flow 16 000 2005 0 1 2 ... 23 24 876.54 876.54 876.54 876.54 876.54 6. A person bought a car for U.S. $ 16,000.00 today and pay the same in 24 insta llments of R $ 840.00 starting today. Cash Flow 16 000 2006 0 1 2 ... 23 840.00 840.00 840.00 840.00 840.00 7. A person bought a car for U.S. $ 12,000.00 today and pay in 20 installments v ariables that begin with R $ 500.00 and $ 100.00 will increase each month, the f irst installment paid from next month. Cash Flow 12 000 2007 0

1 2 ... 19 20 500 600 ... 2300 2400 8. A person bought a car for U.S. $ 12,000.00 today and pay in 20 installments v ariables that begin with R $ 500.00 and $ 100.00 will increase each month, the f irst installment paid already at baseline. Cash Flow 12 000 2008 0 1 2 ... 18 19 500 600 700 ... 2300 2400 9. A person financing an object in n equal portions and R followed by currencies as of next month. If the bank rate of interest is i% per month, which is the pr esent value (PV) of this object? VP = 09 The Cash Flow 0 1 2 ...

n-1 n R 10. Mathematical Solution: R 2 R 3 R n R 11. A = R / (1 + i) + R / (1 + i) + R / (1 + i) +...+ R / (1 + i) 12. which can also be written in the form 13. A person financing an object into five equal portions and followed by $ 1,00 0.00 from next month. If the bank rate of interest is 7% per month, which is the present value (PV) of this object? VP Cash Flow 10 0 1 2 3 4 5 14. Mathematical Solution: How i = 7% = 0.07, R = 1000 and n = 5, then the formu la of previous item, we have: 1000 1000 1000 1000 1000 15. A person financing an object in n equal portions and followed by R monetary units beginning this month. If the bank rate of interest is i% per month, which is the present value (PV) of this object? VP = 11 The Cash Flow 0 1 2

... n-1 R 16. Mathematical Solution: R 2 R 3 R R n-1 17. A = R + R / (1 + i) + R / (1 + i) + R / (1 + i) +...+ R / (1 + i) 18. which can also be written in the form 19. Consider the problem of item 10 and a new alternative.€Refinance the purcha se of the object that costs the present value (obtained in the Cash Flow 10) int o 4 equal portions and followed from the initial months. Consider the same bank rate of interest. What should be the value of each new tranche R? What will be t he percentage of increase of supply in respect of the previous tranche, with thi s new alternative? 4100.20 Cash Flow 12 0 1 2 3 20. Mathematical Solution: How i = 7% = 0.07, PV = 4100.20 n = 4, then the formu la of previous item, we have: R? R? R? R? 21. which can be written as 22. 4100.20 R = 3.6243160444 à 23. whence it follows that 24. R = 1131.30 25. The new plot on the previous rose 13.20%. 26. NOTE: Thi s percentage may change if the applied rate is changed. Built by Ulysses Sodré Updated 31/jul/2003, 06:03