Definition of 'Conventional Cash Flow'
A series of inward and outward cash flows over time in which there is only one change in the cash flow direction. A conventional cash flow for a project or investment is typically structured as an initial outlay or outflow, followed by a number of inflows over a period of time. In terms of mathematical notation, this would be shown as -, +, +, +, +, +, denoting an initial outflow at time period 0, and inflows over the next five periods.
The term is particularly used in discounted cash flow (DCF) analysis. A conventional cash flow would have only one internal rate of return (IRR), making it a relatively easy task to choose among several projects or investments with such cash flows.
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