Final answer:
To calculate the Present Value of uneven cash flows, discount each cash flow back to its present value using an appropriate interest rate and sum them together. To calculate Future Value, compound each cash flow forward to a future date using the same interest rate.
Step-by-step explanation:
To calculate the Present Value (PV) and Future Value (FV) of a series of uneven cash flows, several steps must be followed. For PV, each cash flow is discounted back to its present value based on the period it will be received and the selected interest rate. To discount a cash flow, you use the formula:
PV =
where FV is the future value of the cash flow, i is the interest rate, and n is the number of periods until the cash flow is received.
After you calculate the present value for each cash flow, you add them together to get the total PV for the series. To find the FV of a series of cash flows, you compound each cash flow forward to the desired future date using the same interest rate.