Havana, Inc., has identified an investment project with the following cash flows

Question

Havana, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1= $ 1,100 2= 1,330 3= 1,550 4= 2,290

Requirement 1: Assume the discount rate is 6 percent, what is the future value of these cash flows in Year 4? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Future value $

Requirement 2: What is the future value at an interest rate of 14 percent? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Future value $

Requirement 3: What is the future value at an interest rate of 21 percent? (Do not include the dollar sign ($). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).) Future value $

Explanation / Answer

Cash Flow 1= $ 1,100

2= 1,330

3= 1,550

4= 2,290

FV = PV(1+r)n

1) FV at 6% = (1,100)(1.06)4 + (1,330)(1.06)3 + (1,550)(1.06)2 + (2,290)(1.06)1

FV = 1388.72 + 1584.05 + 1741.58 + 2427.40

FV = 7141.75

2) FV at 14%

FV = (1,100)(1.14)4 + (1,330)(1.14)3 + (1,550)(1.14)2 + (2,290)(1.14)1

FV = 1857.85 + 1970.45 + 2014.38 + 2610.60

FV = 8453.28

3) FV at 21%

FV = (1,100)(1.21)4 + (1,330)(1.21)3 + (1,550)(1.21)2 + (2,290)(1.21)

FV = 2357.94 + 2356.17 + 2269.35 + 2770.90

FV = 9754.36

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