Question

. At a rate of 6.5%, what is the future value of the following cash flow stream? (4)
Years: 0 1 2 3 4 |||||
CFs: $0 $75 $225 $0 $300

Answer 1

Answer:

Total future value= $645.8

Explanation:

Given:

Year 0 1 2 3 4

CFs: $0 $75 $225 $0 $300

Interest rate = 6.5%

Formula on each cash flow:

FV = PV × (1 + i)^n

➡ Cf1 = 75 × (1.065)³ = 90.60

➡ Cf2 = 225 × (1.065)² = 255.20

➡ Cf3 = 0

➡ Cf4 = 300

Total future value= $645.8

Answer 2

Answer:

The future value is $ 645.80

Explanation:

Solution :

Rate of Interest (r) = 6.5 %

Future Value = ?

Formula :

FV = PV (1 + r)$^{n}$

• FV = Future Value
• PV = Present Value
• r = Rate of interest
• n = number of periods interest 

Years:__ CFs:

0 _____ $0

1 ______$75

2 _____$225

3 ______$0

4 ______$300

• $CFs(1) = \ 75 (1 +6.5)^{3}$

$\longrightarrow \: 75(1 + 0.065) ^{3}$

$\longrightarrow \: 75 \: (1.065) ^{3}$

$\longrightarrow \: 90.60$

• $CFs(2) = \ 225 (1 +6.5)^{2}$

$\longrightarrow \:225(1 \: + \: 0.065) ^{2}$

$\longrightarrow \:225(1.065) ^{2}$

$\longrightarrow \:255.20$

• CFs (3) = $0

• CFs (4) = $300

Total future value :

$\longrightarrow$ 90.60 + 255.20 + 300

$\longrightarrow$ 645.80

∴ The future value is $ 645.80