Assume a ten year investment will provide you with a cash flow of $4000 at the e

Question

Assume a ten year investment will provide you with a cash flow of $4000 at the end of the first year. These cash flows will grow at an annual rate of 3% through year 10. Find the future value of these cash flows as of the end of year 10 if they are invested at a 10% annual return.


NOTE: I would like the answer given in two ways. First, I am using a BA II Plus finance calculator and would like to apply this equation to the TVM feature and would also like to see the long mathematical version to solve this problem.

Explanation / Answer

Here i assumed cash was flown for only one year that is $4000 and it has grown up by 3 % annully.. and this grown amount of cash flow has invested with 10 % rate ... pleas go through the file... grow with 3% invested at year cash flows at 10% 1 4000 4400 2 4120 4985 3 4244 5648 4 4371 6399 5 4502 7251 6 4637 8215 7 4776 9307 8 4919 10545 9 5067 11948 10 5219 13537 In mathematical way... for 3% growth .. At the end of 10th year... FV = PV*(1+r)n = 4000(1.03)^10 = 5219. if it is invested with 10% annual rate = FV = V*(1+r)n =5219(1.10)^10 = 13537 (aprox) grow with 3% invested at year cash flows at 10% 1 4000 4400 2 4120 4985 3 4244 5648 4 4371 6399 5 4502 7251 6 4637 8215 7 4776 9307 8 4919 10545 9 5067 11948 10 5219 13537

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