Question

Question 3 Unsaved You have been offered the opportunity to invest in a project that will pay $1,067 per year at the end of years one through three and $9,409 per year at the end of years four and five. These cash flows will be placed in a saving account that pays 8.22 percent per year. What is the future value of this cash flow pattern at the end of year five?

Answer 1

Answer:

Amount Invested for Year 1 - 3 = $1,067 per year
Amount Invested for Year 4 - 5 = $9,409 each year
Rate = 8.22%

Future Value = [1,067 *(1+0.0822)^4] + [1,067 *(1+0.0822)^3] + [1,067 *(1+0.0822)^2] + [9,409 *(1+0.0822)^1] + [9,409 *(1+0.0822)^0]
Future Value = [1,067 *(1.0822)^4] + [1,067 *(1.0822)^3] + [1,067 *(1.0822)^2] + [9,409 *(1.0822)^1] + [9,409 *(1.0822)^0]
Future Value = $1,463.51 + $1,352.34 + $1,249.62 + $10,182.42 + $9,409
Future Value = $23,656.89