Alternative Methods for Cash Flow Modeling

Abstract

The use of transform techniques can greatly enhance The task of modeling cash flows. Considerable work has been done since Crubbatrom's on the application of transform technique to cash-flow analysis. However, little attention is given to transform techniques by the engineering economics community at large, as evidenced by the lack of ita coverage In engineering economy textbooks. This paper represents the continual effort of the authors to suggest the use of transform techniques for engineering economy problems. A loan problem is formulated using the traditional method, the Zeta-transform method, and a difference equation approach using matrix methods. Simplified results are obtained using closed-form solutions from both the transform and difference equation methods. The loan problem is extended to an equipment financing situation, which is formulated using the Zeta-transform method and the traditional method as well. An illustrative example is included.