Two types of cash flow streams are possible, the annuity and the mixed stream. Whereas an annuity is a pattern of equal periodic cash flows, a mixed stream consists of unequal periodic cash flows that reflect no particular pattern. Financial managers frequently need to evaluate opportunities that they expect to provide mixed streams of future cash flows. Here we consider both the future value and the present value of mixed streams.
Determining the future value of a mixed stream of cash flows is straightforward. We compute the future value of each cash flow at the specified future date and then add all the individual future values to find the total future value.