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ID: 1171631 • Letter: #
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? | Click here to read the eBook: Future Values Click here to read the eBook: Present Values PRESENT AND FUTURE VALUES OF A CASH FLOW STREAM An investment will pay $100 at the end of each of the next 3 years, $200 a. If other investments of equal risk earn 11% annually, what is its present value? Round your answer to the nearest cent. : 0 at the end of Year 4, $400 at the end of Year 5, and $550 at the end of Year 6 b. If other in nts of equal risk earn 11% annually, what is its future value? Round your answer to the nearest cent. Check My Wor aa fa Fs 7 9 2 3Explanation / Answer
Requirement (a) Present Value of the Investment = $907.55
Year
Cash Flow
Present Value Factor
Present Value of cash flows
1
100
0.9009
90.09
2
100
0.81162
81.16
3
100
0.73119
73.12
4
200
0.65873
131.75
5
400
0.59345
237.38
6
550
0.53464
294.05
Total Present Value of cash flows
$907.55
Requirement (b) Future Value of the Investment = $1,697.50
Year
Cash Flow
Future Value of this cash flow
Future Value
1
100
168.51
[ 100*1.11*1.11*1.11*1.11*1.11]
168.51
2
100
151.81
[100*1.11*1.11*1.11*1.11]
320.32
3
100
136.76
[100*1.11*1.11*1.11]
457.08
4
200
246.42
[200*1.11*1.11]
703.50
5
400
444.00
[400*1.11]
1,147.50
6
550
550.00
[550*1]
1,697.50
Future Value of cash flow
$1,697.50
Year
Cash Flow
Present Value Factor
Present Value of cash flows
1
100
0.9009
90.09
2
100
0.81162
81.16
3
100
0.73119
73.12
4
200
0.65873
131.75
5
400
0.59345
237.38
6
550
0.53464
294.05
Total Present Value of cash flows
$907.55
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