Answer:
$1,961.65
Explanation:
The formula for finding future value :
FV = P (1+r)^n
P = Present value
R = interest rate
N = number of years
First step is to find the present value of the cash flows.
PV can be found using a financial calculator
Cash flow in year 1 = $254
Cash flow in year 2 = $412
Cash flow in year 3 = $1,230
I = 7%
Present value = $1,601.29
I would now input the value of p in the FV formula
$1,601.29 ( 1 + 0.07) ^3 = $1,961.65
To find the PV using a financial calacutor:
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