Question

Based on 15% compound interest rate and the following cash flows, present the answer in the...

Based on 15% compound interest rate and the following cash flows, present the answer in the form of a single table.

  1. What is the overall present worth
  2. What is the present worth for each year?
  3. What is the overall future worth?
  4. What is the future worth for each year?

End of Year (EOY)

Cash Flow (CF)

0

-$25,000

1

$12,500

2

$10,000

3

$7,500

4

$10,000

5

$12,500
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Homework Answers

Answer #1

Answer:

EOY Cash flow(CF)(in $) Present worth(b)(in $) Future worth(d)(in $)
0 -25000 -25000 -25000(2.011)=-50275
1 12500 12500(0.8696)=10870 12500(1.749)=21862.5
2 10000 10000(0.7561)=7561 10000(1.521)=15210
3 7500 7500(0.6575)=4931.25 7500(1.322)=9915
4 10000 10000(0.5718)=5718 10000(1.150)=11500
5 12500 12500(0.4972)=6215 12500
Total (a)=10295.25 (c)=20712.5

Future worth is calculated at the end of year 5.

Present worth is calculated as cashflow(P/F,15%, EOY)

Future worth is calculated as cashflow[F/P,15%,(5-EOY)]

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