Question

Maple is very happy that her investment in a​ neighbor's business is going to result in cash inflows over the next three​ years: She will be receiving$37,172 at the end of this​ year,$74,344 at the end of next​ year, and$111,516 at the end of the year after that​ (three years from​ today). The interest rate is12.1%per year.

a. What is the present value of​ Maple's cash​ inflows?

The present value of​ Maple's cash inflows is

​$nothing.

​(Round to the nearest​ dollar.)

b. What is the future value of​ Maple's cash inflows in three years​ (on the date of the last​ payment)?

The future value of​ Maple's cash inflows in three years is

​$nothing.

​(Round to the nearest​ dollar.

Answer 1

Answer :

a. Present Value = [Amount Received at the end of year 1 / (1+interest rate)^1] + [Amount Received at the end of year 2 / (1+interest rate)^2] + [Amount Received at the ned of year 3  / (1+interest rate)^3]

Present Value = [37172 / 1.121] + [74344 / (1.121)^2] + [111516 / (1.121)^3]

Present Value = 33159.6788597 + 59160.8900225 + 79162.65391

Present Value = 171,483.22279 or 171,483

b. Future Value = Amount Received at the end of year 1 * (1+interest rate)^2 + Amount Received at the end of year 2* (1+interest rate)^1 + Amount Received at the end of year 3

Future Value = [37172 * 1.121^2] + [74344 * 1.121^1] + 111516

Future Value = 46711.859252 + 83339.624 + 111516

Future Value = 241,567.483252 or 241,567