Question

Consider an investment of $30,000 that is deposited in year 0 and the amount invested increases...

Consider an investment of $30,000 that is deposited in year 0 and the amount invested increases by 10% per year through year 8 at an interest rate of 10% per year.

Draw a cash flow diagram and label it with all cash flows from year 0 to year 8.

Calculate the future value of this investment at the end of year 8.

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Answer #1

Calculation of Future Value of the investment
Year Cash Flows Discount Factor @10% Discounted Cash Flows
A B C=1/(1+10%)^(8-A) D = B*C
0 30000 2.14358881 64307.6643
1 33000 1.9487171 64307.6643
2 36300 1.771561 64307.6643
3 39930 1.61051 64307.6643
4 43923 1.4641 64307.6643
5 48315.3 1.331 64307.6643
6 53146.83 1.21 64307.6643
7 58461.513 1.1 64307.6643
8 64307.6643 1 64307.6643
Future Value 578768.9787
Therefore, Future value of the investment is $578,768.98
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