Question

Problem 4-7 Present and Future Value of an Uneven Cash Flow Stream An investment will pay...

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.
$  

Homework Answers

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

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