Answer:
Present value is $923.90 and future value is $1,466.24
Explanation:
Given:
$100 is received in the next three years. It's an annuity so refer present value of annuity table. Present value annuity factor for 3 years, 8% is 2.5771. So present value of this will be $257.71 (2.5771 × 100). Similarly calculation for inflows from the investment are as follows:
$200 at 8% in the 4th year, present value factor of lumpsum amount is 0.7350 which is $147 (0.735 × 200)
$300 at 8% in the 5th year, present value factor of lumpsum amount is 0.6806 which is $204.18 (0.6806 × 300)
$500 at 8% in the 6th year, present value factor of lumpsum amount is 0.6302 which is $315.10 (0.6302 × 500)
Total present value of investment is $923.90 (257.71 + 147 + 204.18 + 315.10)
Present value of inflows are calculated. Calculate future value of these amounts.
future value factor @8%, 6 years is 1.5869.
Future value of first inflow is $408.96 (257.71 × 1.5869)
Future value of second inflow is $233.27 (147× 1.5869)
Future value of third inflow is $324.01 (204.18 × 1.5869)
Fourth Inflow in the sixth year is $500
Total present value of investment is $1,466.24 (408.96 + 233.27 + 324.01 + 500)
