Chapter Overview

In Chapter 2, we derived the equations to calculate the present, future, or annual worth of specific cash flow series. In this chapter, we have shown that these equations apply to cash flow series different from those for which the basic relations are derived. For example, when a uniform series does not begin in period 1, we still use the P/A factor to find the “present worth” of the series, except the P value is located not at time 0, but one period ahead of the first A value. For arithmetic and geometric gradients, the P value is two periods ahead of where the gradient starts. With this information, it is possible to solve for any symbol—P, A, or F—for any conceivable cash flow series.

We have experienced some of the power of spreadsheet functions in determining P, F, and A values once the cash flow estimates are entered into spreadsheet cells.