Question

1)      Rasputin, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? What is the future value at a discount rate of 11 percent? At 24 percent?

Year	Cash Flow
1	$ 900
2	1,000
3	1,100
4	1,200

Answer 1

Solution-

Future value of cash flows = Present value of cash flows (1+rate)^n

Calculation of future value of cash flows in year 4 @8%

Future value =900*(1+0.08)^3+1000*(1+0.08)^2+1100*(1+0.08)^1+1200*(1+0.08)^0= $4688.14

Calculation of future value of cash flows in year 4 @ 11%

Future value = 900*(1+0.11)^3 + 1000*(1+0.11)^2+ 1100*(1+0.11)^1+ 1200*(1+0.11)^0= $4883.97

Calculation of future value of cash flows in year 4 @ 24%

Future value = 900*(1+0.24)^3+ 1000*(1+0.24)^2+ 1100*(1+0.24)^1 + 1200* (1+0.24)^0= $5817.56

answered by: anonymous