Fuente, Inc., has identified an investment project with the following cash flows
ID: 2822028 • Letter: F
Question
Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flovw 2 3 4 $1,000 1,230 1,450 2,190 a. If the discount rate is 9 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. If the discount rate is 12 percent, what is the future value of these cash flows in Year c. If the discount rate is 23 percent, what is the future value of these cash flows in Year a. | Future value at 9% b. | Future value at 12% c. | Future value at 23%Explanation / Answer
We use the formula:
A=P(1+r/100)^n
where
A=future value
P=present value
r=rate of interest
n=time period.
1.
A=1000*(1.09)^3+1230*(1.09)^2+1450*(1.09)+2190
=$6526.89(Approx).
2.
A=1000*(1.12)^3+1230*(1.12)^2+1450*(1.12)+2190
=$6761.84
3.
A=1000*(1.23)^3+1230*(1.23)^2+1450*(1.23)+2190
which is equal to =$7695.23(Approx).
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