Question

Find the future value (as of the end of Year 4) of the following cash flow stream if the discount rate is 4.08%: CF1 = 76, CF2 = 61, CF3 = 35, CF4 = 20. The cash flows are received at the end of each year.
Round to the nearest $0.01 (e.g., if your answer is $275.386, record it as 275.39).
Blank 1. Calculate the answer by read surrounding text.

Answer 1

Future value of cash flows is calculated using following formula

FV = CF*(1+r)N

Where, FVT is the future value of cash flow at time T

CF is the present value of cash flow

r is the discount rate

N is the number of years remaining to time T

Year	Cash flow	Future value of cash flow
1	76	76*(1+0.0408)^3 = 85.687
2	61	61*(1+0.0408)^2 = 66.079
3	35	35*(1+0.0408)^1 = 36.428
4	20	20*(1+0.0408)^0 = 20

Therefore future value at the end of year 4 = $85.687 + $66.079 + $36.428 + $20

= $208.19