CF0

CF0 is a financial notation used to denote the cash flow occurring at time zero—the initial investment required to start a project or undertake a capital expenditure. In many present-value analyses, CF0 is recorded as a negative number, representing cash outlay, while subsequent cash flows (CF1, CF2, etc.) are the cash inflows or outflows in later periods. The sign convention can vary, but CF0 commonly reflects the upfront cost.

In net present value analysis, CF0 serves as the starting point for discounting future cash flows. The standard formula is NPV = CF0 + CF1/(1+r) + CF2/(1+r)^2 + ... + CFn/(1+r)^n, where r is the discount rate. A correct CF0 is essential for a meaningful NPV, as it anchors the timeline at t = 0 and influences the project’s evaluated viability.

Example: a project that requires an upfront investment of 150,000 has CF0 = -150,000. If it yields 40,000 per year for 5 years and the cost of capital is 8%, the NPV is calculated using the CF0 term plus the discounted future cash flows.

CF0 is also central to related measures, such as the internal rate of return (IRR), which is the discount rate that makes NPV equal to zero given CF0 and the subsequent cash flows. While predominantly used in finance, CF0 may appear in other analytical contexts as a label for an initial condition or starting cash balance in a sequence of cash flows.