Investment Timing
How can we model when the best time to invest is? All you have to do is see the different values of PV(inflows)-PV(outflows) over time. So if we could invest in these times, when would we? Assume r=5%
Challenge
Pick the best investment from below.
| Year | Inflow | Outflow |
| 0 | 20 | -10 |
| 2 | 30 | -15 |
| 4 | 40 | -25 |
Solution
print(Cashflow(20,0,.05).PV+Cashflow(-10,0,.05).PV)
print(Cashflow(30,2,.05).PV+Cashflow(-15,0,.05).PV)
print(Cashflow(40,4,.05).PV+Cashflow(-25,0,.05).PV)If you run these above function, you will see that the best deal is in period 2.
Source Code