If a few intermediate cash flows in valuing a stream of cash flows are zero can we delete those points on the timeline and squeeze the timeline to show only nonzero cash flows?
What will be an ideal response?
Answer: Every cash flow contains two pieces of information—the nominal value and the time stamp. If we decide to eliminate the zero cash flows from the timeline and concentrate only on the nonzero ones, we will be distorting the time stamp of some nonzero cash flows. Hence, we need to show the timeline in full, including all cash flows zero as well as nonzero.
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