Question

Wells, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $ 865 2 1,040 3 1,290 4 1,385 a. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4

Answer 1

Answer:

Total FV= $5,080.86

Explanation:

Giving the following information:

Cash Flow:

Cf1= $865

Cf2= $1,040

Cf3= $1,290

Cf4= $1,385

Discount rate (i)= 8%

To calculate the total future value, we need to apply the following formula to each cash flow:

FV= Cf*(1+i)^n

Cf1= 865*1.08^3= 1,089.65

Cf2= 1,040*1.08^2= 1,213.01

Cf3= 1,290*1.08= 1,393.2

Cf4= 1,385

Total FV= $5,080.86