Question

An investment will pay $100 at the end of each of the next 3 years, $200 at the end of Year 4, $250 at the end of Year 5, and $450 at the end of Year 6. If other investments of equal risk earn 6% annually, what is this investment's present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent. Present value: $ Future value: $

Answer 1

Answer:

$929.77

$1318.90

Explanation:

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

Cash flow each year from year 1 to 3 = $100

Cash flow in year 4 = $200

Cash flow in year 5 = $250

Cash flow in year 6 = $450

I = 6%

PV = $929.77

the formula for calculating future value is :

FV = PV ( 1 + r)^n

929.77 x (1+0.06)^6 = $1318.90

To find the PV using a financial calculator:

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