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BA II PLUS: Cash Flow time zero and BGN

TVM payment timing does not move Cash Flow worksheet entries; their sequence defines the modeled dates.

Omni Finance AcademyBy Omni Finance Academy
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Write the original schedule

A fictional exercise pays 1,000 now and receives 100 at the beginning of each of four annual intervals. Receipts occur at times zero, one, two and three. Net time-zero cash flow is −1,000 + 100 = −900.

Represent the time-zero receipt explicitly

  1. Enter the net time-zero flow in a cleared worksheetCF2ndCLR WORK900+/−ENTER

    CF0 is −900, combining the immediate outflow and receipt.

  2. Enter the remaining receipts↓100ENTER↓3ENTER

    C01 = 100 and F01 = 3 represent times one, two and three.

  3. Calculate at ten percent per annual intervalNPV10ENTER↓CPT

    Expected mathematical NPV: -651.314801.

Compare an end-period schedule

Keeping CF0 = −1,000 and entering four subsequent 100 receipts instead places them at times one through four. Its NPV is −683.013455, rather than −651.314801 for the beginning pattern. Choosing BGN in TVM does not repair that Cash Flow entry sequence.

Net only cash flows at the same date

The time-zero combination is valid because both amounts occur immediately in this model. Do not net a later receipt into CF0 merely because it belongs to the same calendar year. Preserve each actual modeled date before compressing a schedule.

Further references