Question

QEP Resources has a project with initial investment requiring $-55,000 and the following cash flows will...

QEP Resources has a project with initial investment requiring $-55,000 and the following cash flows will be generated because of the project: $13,750; $55,000; $64,000; and $64,000 respectively at the end of each year for the next four years. If the required rate of return is 0.15, find the future value of these cash flows.

Homework Answers

Answer #1

Required rate of Return(r) = 7%

Calculating the Future value of Cashflows:-

Future Value = Cash-Inflow in year-end 1(1+r)^3 + Cash-Inflow in year-end 2(1+r)^2 + Cash-Inflow in year-end 3(1+r)^1 + Cash-Inflow in year-end 4(1+r)^0

FV = 13,750(1+0.15)^3 + 55,000(1+0.15)^2 + 64,000(1+0.15)^1 + 64,000(1+0.15)^0

= 20912.03 + 72,737.5 + 73,600 + 64,000

= $231,249.53

So, Value at the cash flows are $231,249.53

Note- Initial cost does not form part of cash flows.

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