Question

Pharoah Inc. is expecting a new project to start producing cash flows, beginning at the end of this year. They expect cash flows to be as follows:
Year 1: $663,547
Year 2: $698,214
Year 3: $795,908
Year 4: $798,326
Year 5: $755,444
Required:
(A) If Pharoah can reinvest these cash flows to earn a return of 7.2 percent, what is the future value of this cash flow stream at the end of 5 years?

Answer 1

Answer:

$3,095,732.50

Explanation:

The cash flows for each years will be discounted in future value with 7.2%. More explanation are as attached as well as the calculations.

Answer 2

Answer:

Total sum =  $4,262,337.67  

Explanation:

The accumulated muse at the end of year 5 will be the future sum of each of the cash flow invested at 7.2% compounded annually.

They will be compounded using the formula below

FV = A  ××(1+r)^n

                                                                      $

First cash flow = 663,547× 1.072^(4) =  876,296.00

Second cash flow =,698,214. ×1.072^(3= 860,147.45

Third cash flow = 795,908 × 1.072^ 2  = 914,644.73

Fourth cash flow = 798,326× 1.072^ 1 =855,805.472

Fifth cash flow = 755,444×1.072^ 0=      755,444 .00

Total sum =                                                4,262,337.67