Question

an investment will pay $100 at the end of each of the next 3 years, $200 at the end of year 4, $300 at the end of year 5, and $500 at the end of year 6. If other investments of equal risk earn 8% annually, what is this investment's present value? Its future value?

Answer 1

Answer:

Total Present value = $923.98

Total Future Value = $1,466.23

Step-by-step explanation:

Given data:

total investment for next three year is $100

total investment for 4th year $200

total investment  for 5th year $300

total investment for 6th year $500

Present value is calculated as

Year 1

$\frac{ 100}{(1.0 + .08)} = 92.59$

Year 2

$\frac{100}{(1.0 + .08)^2} = 85.73$

Year 3

$\frac{100}{(1.0 + .08)^3} = 79.38$

Year 4

$\frac{200}{(1.0 + .08)^4}= 147.01$

Year 5

$\frac{300}{(1.0 + .08)^5}= 204.17$

Year 6

$\frac{500}{(1.0 + .08)^6}= 315.08$

Total Present value = $923.98

future value calculation:

Year 1

$100 \times (1.0 + .08)^5 = 146.93$

Year 2

$100 \times (1.0 + .08)^4 = 136.05$

Year 3

$100 \times (1.0 + .08)^3 = 125.97$

Year 4

$200 \times (1.0 + .08)^2 = 233.28$

Year 5

$300 \times (1.0 + .08)^1 = 324.00$

Year 6

$500 \times (1.0 + .08)^0 = 500.00$

Total Future Value = $1,466.23

Answer 2

Answer:

NPV = $923.98

FV = $1466.23

Step-by-step explanation: