Draw and Solve the Cash Flow Diagram for Future Value F. This is a 10 year Cash

Question

Draw and Solve the Cash Flow Diagram for Future Value F. This is a 10 year Cash Flow and Interest Rate is a compounded 7%

1) $3000 is invested today for a machine.

2) $1000 is earned as annual income from end of years 4-10 from this machine.

3) $300 is an annual maintenance fee for all 10 years.

4) The salvage value of at the end of the 10th year is $1200

5) There's an arithmetic gradient income from years 6-10 with a base annuity of $600 and an Annual gradient G of +50

What is the Future Value (F) of the cash flow investment?

Explanation / Answer

Year 0 1 2 3 4 5 6 7 8 9 10 Initial Investment -3000 Annual Income 1000 1000 1000 1000 1000 1000 1000 Annual Maintenance 300 300 300 300 300 300 300 300 300 300 Salvage value 1200 Additional Income 600 650 700 750 800 Free cash flow -3000 -300 -300 -300 700 700 1300 1350 1400 1450 2700 Future Value $3,794.32

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