If a firm is considering opening a new production facility or investing in expansion into a new market it anticipates receiving revenues in many different periods, not just one isolated period at some point in the future. It may well be the case that the amount of revenue it expects to receive varies from period to period as well.

    Suppose a new piece of equipment is expected to add revenue for 3 periods. Suppose revenue will be R1 in period one, R2 in the second period, and R3 in the third period. The expression to the left gives the Present Value of this stream of revenue when the interest rate is the same, r, in every period.

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