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Chapter 20. Building Discount Formulas > Discounting Cash Flows

Discounting Cash Flows

One very common business scenario is to put some money into an asset or investment that generates income. By examining the cash flows—the negative cash flows for the original investment and any subsequent outlays required by the asset, and the positive cash flows for the income generated by the asset—you can figure out whether you've made a good investment.

For example, consider the situation discussed earlier in this chapter: You invest in a property that generates a regular cash flow of rental income. When analyzing this investment, you have three types of cash flow to consider:


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