Present and future value formulae for uneven cash flow Based on performance of a Business

Ameha Tefera Tessema

Advances in Management and Applied Economics, 2011, vol. 1, issue 1, 4

Abstract: Business firm's income is not constant, or fixed from period to period because of this firm’s cash inflow or out flow is uneven. The decision of a firm either to invest or to borrow from creditors based on uneven cash in-flow need to have a future or a present value prediction formula. The problem to find future and present value formulae for uneven cash flow stayed unsolved for long periods. However, on this paper it wanted to show future and present value of uneven cash flow prediction formulae based on the performance rate (Pn ) of a business. The Performance rate (Pn) is a percentage by which the current performance, economic value added (EVAn ), of the business exceeds the previous performance. Therefore, the firm cash out flows either for investment or for repayment of the borrowed loan growth according to the performance rate (p) of the firm.

Date: 2011
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