Comparing Cash-Flow Streams
To compare some set of cash-flow streams, they all need to be converted into the same basis, such as present worth. After all the different proposals are expressed in the same basis for comparison, the best one will be obvious. The mechanics of the actual choice are shown in detail in the next chapter.
Keeping in mind that different proposals need to be compared on a consistent basis, always be sure to use the same interest rate, i, and planning horizon (study period), n, for each of the cash-flow streams. Planning horizons are covered in more detail in Chapter 11.
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