Trigen Corp. management will invest cash flows of $1,115,036, $1,467,128, $912,3

Question

Trigen Corp. management will invest cash flows of $1,115,036, $1,467,128, $912,300, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 7 percent, what is the future value of these investment cash flows six years from today? (Round answer to 2 decimal places, e.g. 15.25.)

Future value $ Trigen Corp. management will invest cash flows of $1,115,036, $1,467,128, $912,300, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 7 percent, what is the future value of these investment cash flows six years from today?

Explanation / Answer

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Future value with multiple cash flows: Trigen Corp. is expecting to invest cash flows of $1,128,358, $1,047,490, $1,427,185, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 6.3 percent, what is the future value of these investment cash flows

ANSWER:

Future value is assumed at the end of Year -6 or begining of Year -7. It is also assumed that Cash flows are being incurred at the end of each year.

e.g. Cash flow of Year -1 has been taken for 5 years for future value purpose.

Solution is given below:

Year Cashflow Factor Future Value at Year -6 end

Year 1 1,128,358 X (1+6.3%)^5 = 1,531,487

Year 2 1,047,490 X (1+6.3%)^4 = 1,337,467

Year 3 1,427,185 X (1+6.3%)^3 = 1,714,273

Year 4 818,400 X (1+6.3%)^2 = 924,767

Year 5 1,239,644 X (1+6.3%)^1 = 1,317,742

Year 6 1,617,848 X 1 = 1,617,848

Total Future Value = 8,443,583   

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