Question

Phosfranc Inc., is expecting the following cash flows starting at the end of the year—$133,245, $152,709, $161,554, and $200,760. If their opportunity cost of capital is 9.4 percent, find the future value of these cash flows. (Round to the nearest dollar.)

Answer 1

Answer:

$734,730.52

Explanation:

We know that

Future value = Present value × (1 + rate)^number of years

So for first year, the future value is

= $133,245 × (1 + 9.4%)^3

= $133,245 × 1.309338584

= $174,462.82

For second year, the future value is

= $152,709 × (1 + 9.4%)^2

=  $152,709 × 1.196836

= $182,767.63

For third year, the future value is

= $161,554 × (1 + 9.4%)^1

= $161,554 × 1.094

= $176,740.08

For fourth year, the future value is

= $200,760 × (1 + 9.4%)^0

= $200,760 × 1

= $200,760

Total value is

= $174,462.82 + $182,767.63 + $176,740.08 + $200,760

= $734,730.52