Cash Flow Analysis
EOY Cash Flow = Interest Earned @ 10% + Return of (initial investment)
Question:
I understand the numbers plugged into the formula, but logically I don't understand why is the return of the $10,000 initial investment in year 1 ($1,000)? We started with $10,000 and EOY investment amount to be reinvested in year 2 is $11,000. Since none of the $11,000 came out there is no return on investment, shouldn't return of be $0?
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