Money is an integral part of modern life. During our lifespan, we receive and pay money at different points in time. At times, we may need to make a choice in terms of the amount, and the timing, of these payments and receipts. It is essential to understand and appreciate the impact of these cash flows in order to make the right choice and get the best value from them. Let us start by appreciating some instances of different patterns of cash flows.

1. 1. You have a choice between two offers.

2. a. Receive ₹10,000 now.

3. b. Receive ₹11,000 next year.

4. Which one would you opt for?

5. 2. You are planning to buy a car for ₹500,000.

6. a. Dealer A offers 10 per cent off the price and lends the balance at the regular rate of 9 per cent for seven years.

7. b. Dealer B offers to lend you ₹500,000 at 5 per cent for seven years. Which of the two financing options would you choose?

8. 3. A firm is contemplating investing ₹10 billion in a project that is expected to generate ₹2 billion per annum over the next seven years. Should the firm accept the proposal?

9. 4. You are planning to buy a house costing ₹7,500,000. The housing finance company offers a loan for 20 years at 10 per cent per annum. Given your monthly income, you can pay an EMI of ₹50,000 only. What is the maximum value of loan that can be availed by you?

10. 5. ABC Ltd has 5 million shares outstanding. Its shares are priced at ₹60. An offer has been made by XYZ Ltd for acquisition of ABC Limited at 25 per cent premium to the existing share price. However, the acquisition price is payable over the next five years. As the CFO of XYZ Ltd, what should be your recommendation to the board of directors?

11. 6. As a senior manager of India Infrastructure Finance Company Ltd, you are evaluating a proposal to finance a project to establish a high-tech entertainment park. The project requires large investment; it is risky but promises huge cash flows if successful. How will you decide on financing the project?