6: Cash Flow Calculations 77
NPV and IRR/YR: Discontinuing Cash Flows
&KDSWHUGHPRQVWUDWHVWKHXVHRIFDVKIORZGLDJUDPVWRFODULI\ILQDQFLDO
SUREOHPV7KLVVHFWLRQGHVFULEHVGLVFRXQWHGFDVKIORZV7KH139DQG
,55<5IXQFWLRQVDUHIUHTXHQWO\UHIHUUHGWR DVGLVFRXQWHGFDVKIORZIXQFWLRQV
:KHQDFDVKIORZLVGLVFRXQWHG\RXFDOFXODWHLWVSUHVHQWYDOXH:KHQ
PXOWLSOHFDVKIORZVDUHGLVFRXQWHG\RXFDOFXODWHWKHSUHVHQWYDOXHVDQG
DGGWKHPWRJHWKHU
7KHQHWSUHVHQWYDOXH139IXQFWLRQILQGVWKHSUHVHQWYDOXHRIDVHULHV
RIFDVKIORZV7KHDQQXDOQRPLQDOLQWHUHVWUDWHPXVWEHNQRZQWR
FDOFXODWH139
7KHLQWHUQDOUDWHRIUHWXUQ,55<5IXQFWLRQFDOFXODWHVWKHDQQXDO
QRPLQDOLQWHUHVWUDWHWKDWLVUHTXLUHGWRJLYHDQHWSUHVHQWYDOXHRI]HUR
7KHXWLOLW\RIWKHVHWZRILQDQFLDOWRROVEHFRPHVFOHDUDIWHUZRUNLQJDIHZ
H[DPSOHV7KHQH[WWZRVHFWLRQVGHVFULEHRUJDQL]LQJDQGHQWHULQJ\RXU
FDVKIORZV([DPSOHVRI139DQG,55<5FDOFXODWLRQVIROORZ
Organizing Cash Flows
7 KHFDVKIORZVHULHVLVRUJDQL]HGLQWRDQLQLWLDOFDVKIORZ &)DQG
VXFFHHGLQJFDVKIORZ JURXSVXSWRFDVKIORZV&)RFFXUVDWWKH
EHJLQQ LQJRIWKHILUVWSHULRG$FDVKIORZJURXSFRQVLVWVRIDFDVKIORZ
DPRXQ WDQGWKHQXPEHURIWLPHVLWUHSHDWV
)RUH[DPSOHLQWKHIROORZLQJFDVKIORZGLDJUDPWKHLQLWLDOFDVKIORZLV
²7K HQH[WJURXSRIFDVKIORZVFRQVLVWVRIVL[IORZVRI]HUR
HDFKIROORZHGE\DJU RXSRIWKUHHFDVKIORZV7 KHILQDOJURXS
FRQV LVWVRIRQHFDVKIORZ
chapt_6.fm Page 77 Thursday, June 22, 2000 12:32 PM