Question

Problem 4-7
Present and Future Value of an Uneven Cash Flow Stream

An investment will pay $100 at the end of each of the next 3 years, $400 at the end of Year 4, $600 at the end of Year 5, and $800 at the end of Year 6. If other investments of equal risk earn 10% annually, what is its present value? Round your answer to the nearest cent.
$  

What is its future value? Round your answer to the nearest cent.
$  

Answer 1

a.

Year	Cash inflows	PVF @ 10%	PV of cash flows
1	100	0.909090909	90.90909091
2	100	0.826446281	82.6446281
3	100	0.751314801	75.13148009
4	400	0.683013455	273.2053821
5	600	0.620921323	372.5527938
6	800	0.56447393	451.579144
Total			1346.022519

Present Value = $1346

b.

Year	Cash inflows	FV @10%	FV of cash flows
1	100	1.61051	161.051
2	100	1.4641	146.41
3	100	1.331	133.1
4	400	1.21	484
5	600	1.1	660
6	800	1	800
Total			2384.561000

Future value = $2385