Question

Use the following set of cash flows for the questions below: Table A Year Cash Flow...

Use the following set of cash flows for the questions below:

Table A

Year

Cash Flow

1

$5,973

2

$18,662

3

$61,839

4

$66,528

5

$68,052

6

$73,559

           

  1. Using the cash flows in Table A, determine the future value of the cash flow stream 15 years from now. Use an opportunity cost of 12%. (Hint: negate the PV—NPV—answer before finding the FV.)

  1. Using the cash flows in Table A, determine the present value of the cash flow stream at the following discount rates: 3%, 8%, 12%, 18%, and 22%. (Use a data table to complete these calculations.)

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Answer #1

FV = CF (1+r)^n

where r is opportunity cost

n is o/s period to maturity

PV of CF = CF * PVF (r%,n)

Where r is opportunity cost

n is maturity period.

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