Question

Robert White will receive from his investment cash flows of $4,450, $4,775, and $5,125. If he can earn 7 percent on any investment that he makes, what is the future value of his investment cash flows at the end of three years

Answer 1

Answer:

Total future value= $16,402.09

Explanation:

Giving the following information:

Robert White will receive from his investment cash flows of $4,450, $4,775, and $5,125. He can earn 7 percent on any investment that he makes.

To calculate the future value, we need to use the following formula for each cash flow:

FV= PV*(1+i)^n

Year 1= 4,450*1.07^3= 5,451.44

Year 2= 4,775*1.07^2= 5,466.90

Year 3= 5,125*1.07= 5,483.75

Total future value= $16,402.09

Answer 2

Answer:

$15,329

Explanation:

year            cash flows     future value year 3

  1                   $4,450        x 1.07² = $5,094.81

  2                  $4,775         x 1.07 = $5,109.25

  3                  $5,125              x 1 = $5,125        

                                                $15,329.06

if you want to check if the answer is correct, use an excel spreadsheet and first determine the present value of the 3 cash flows =NPV(7%,4450,4775,5125) = $12,513.08 and then multiply by 1.07³ to get the future value = $15,329.06