How can you determine the future and present value of investments with multiple cash flows?

How can this aid you in capital budgeting?

When we say cash flow it is the process or net amount of cash and cash equivalents being
transferred in and out of a business. Measuring the amount, timing and uncertainty of cash flows
is one the most basic objective of financial reporting. The positive cash flow is a company ability
to create value for shareholders is determined[ CITATION Ken192 \l 1033 ].

As we have discussed in previous Discussion question about the future value which shows the
future value of the investment and return back in future. so, this will only be applicable when
they’re in constant or single cash flow. When it comes to the multiple cash flows, we calculate
cash flows discounted from their respective years and discount rates and do total sum of the
calculation.

The Formula to calculate is;

PV = C1 C2 Cn
.....
+ +

(1 + r)1 (1 + r)2 (1 + r)n

Where,

PV = Sum of PV of future cash flows

C1, C2...Cn = respective periods of cash flow

R =. Discount rate.

By using this formula we can calculate this PV effectively.

Now, Talking about the aid in capital budgeting is the process in a business that undertakes to
evaluate penitential major projects or investments. Capital budgeting will helps us to analyze
project’s cash inflow and outflow to determine whether the expected return will meet the bench
mark or not. Generally, all the business will keep track of the project and opportunities that will
enhance share value but the amount of capital that business has for new projects are limited in
this case the management will use help of the capital budgeting techniques and determine which
project will give us the best outcomes and return over the applicable periods[ CITATION Cap19 \l
1033 ]. Generally this will help us to find out the long term return or which products and services
will be more valuable for company.
This will help us to know much budgeting should be done on different sides of company. The
planning of today will help us to sustain our company in future by knowing where should the
company invest the money either in their machineries or equipment’s or different projects that
How can you determine the future and present value of investments with multiple cash flows?
How can this aid you in capital budgeting?

will gives a healthy return back in time. This is one of the proper way to analyze and invest with
different logics and ideas rather then doing it in random way.

References
Kenton, w. (2019, june 26). Capital Budgeting. Retrieved from Investopedia:
https://www.investopedia.com/terms/c/capitalbudgeting.asp
Kenton, w. (2019, May 5). Cash Flow. Retrieved from Investopedia:
https://www.investopedia.com/terms/c/cashflow.asp