A company has identified an investment project with the following cash flows. Ye

Question

A company has identified an investment project with the following cash flows. Year Cash Flow $1,010 1,240 1,460 2,200 4 If the discount rate is 7 percent, what is the future value of these cash flows in Year 4 (Do not round Intermediate calculations and round your answer to 2 decimal places, e.9, 32.16.) Future value What is the future value at a discount rate of 13 percent? (Do not round intermedlate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value What is the future value at a discount rate of 22 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Future value

Explanation / Answer

Present Value = $ 1010 * 1/(1.07) ^ 1 + $ 1240* 1/(1.07) ^2 + $ 1460* 1/(1.07) ^3 +$ 2200* 1/(1.07) ^4

= $ 4897.15

Future Value = Present Value * ( 1+ Rate of Interest ) ^ Time

= $ 4897.15 * ( 1+7/100) ^ 4

= $ 6,419.16

Hence the correct asnwer is $ 6,419.16

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Present Value = $ 1010 * 1/(1.13) ^ 1 + $ 1240* 1/(1.13) ^2 + $ 1460* 1/(1.13) ^3 +$ 2200* 1/(1.13) ^4

= $ 4,226.06

Future Value = Present Value * ( 1+ Rate of Interest ) ^ Time

= $ 4,226.06* ( 1+13/100) ^ 4

= $ 6,890.48

Hence the correct asnwer is $ 6,890.48

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Present Value = $ 1010 * 1/(1.22) ^ 1 + $ 1240* 1/(1.22) ^2 + $ 1460* 1/(1.22) ^3 +$ 2200* 1/(1.22) ^4

= $ 3,458.09

Future Value = Present Value * ( 1+ Rate of Interest ) ^ Time

= $ 3,458.09* ( 1+22/100) ^ 4

= $ 7,660.83

Hence the correct asnwer is $ 7,660.83

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