Cash Flow Diagrams
The future value of money.
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Cash Flow Diagram - Loan Transaction
A loan transaction starts with a positive cash flow when the loan is received - and continuous with negative cash flows for the pay offs.
- upward arrows - positive cash flow (receiving the loan)
- downward arrows - negative cash flow (pay off)
The Present Value of the cash flows can be calculated by multiplying each cash flow with a Discount Rate.
Cash Flow Diagram - Investment Transaction
An investment transaction starts with a negative cash flow when the investment is done - and continuous with positive cash flows when receiving the pay backs.
- upward arrows - positive cash flows (pay back)
- downward arrows - negative cash flow (investing)
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Related Topics
• Economics
Engineering economics - cash flow diagrams, present value, discount rates, internal rates of return - IRR, income taxes, inflation.
