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  • Discounting Cash Flows

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    JessyRity
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    The document discusses different methods for discounting cash flows, including single-period, multi-period, and discounting with varying discount rates. Single-period discounting uses a single discount rate to calculate the present value of a cash flow received in one period. Multi-period discounting applies different discount rates to cash flows received over multiple periods to calculate the net present value. Discounting cash flows with varying discount rates applies a different discount rate to each period's cash flow.

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    The document discusses different methods for discounting cash flows, including single-period, multi-period, and discounting with varying discount rates. Single-period discounting uses a single discount rate to calculate the present value of a cash flow received in one period. Multi-period discounting applies different discount rates to cash flows received over multiple periods to calculate the net present value. Discounting cash flows with varying discount rates applies a different discount rate to each period's cash flow.

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    11 views3 pages

    Discounting Cash Flows

    Uploaded by

    JessyRity
    The document discusses different methods for discounting cash flows, including single-period, multi-period, and discounting with varying discount rates. Single-period discounting uses a single discount rate to calculate the present value of a cash flow received in one period. Multi-period discounting applies different discount rates to cash flows received over multiple periods to calculate the net present value. Discounting cash flows with varying discount rates applies a different discount rate to each period's cash flow.

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    © All Rights Reserved
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    of 3

    http://breakingdownfinance.

    com

    1 year discounting 2 year discounting multi ye

    E 1200 E 1200 t (in years)


    r 10% r 10% CF
    t 1 t 2 r
    PV(CF)

    B 1090.909091 B 991.74 B
    multi year discounting multi year discounting with different disco

    1 2 3 4 5 t (in years) 1
    110 110 110 110 1110 CF 110
    10% 10% 10% 10% 10% r 2%
    100.00 90.91 82.64 75.13 689.22 PV(CF) 107.84

    1037.91 B 1259.03
    discounting with different discount rates

    2 3 4 5
    110 110 110 1110
    5% 6% 7% 8%
    112.70 97.36 90.99 850.15

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