Answer:
$15,391.91
Explanation:
the first step is to find the present value of the cash flows. After the future value of the sum would be determined.
present value is the sum of discounted cash flows.
present value can be determined using a financial calculator
Cash flow in year 0 = $1500
Cash flow in year 1 = 0
Cash flow in year 2 = $1500
Cash flow in year 3 = 0
Cash flow in year 4 = $1500
Cash flow in year 5 = 0
Cash flow in year 6 = $1500
Cash flow in year 7 = 0
Cash flow in year 8 = $1500
I = 9%
PV = $5472.36
The formula for calculating future value:
FV = P (1 + r) n
FV = Future value
P = Present value
R = interest rate
N = number of years
$5472.36(1.09)^12 = $15,391.91
To find the PV using a financial calculator:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
