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10 December, 03:14

Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $575 2 1,000 3 1,075 4 1,300 a. If the discount rate is 8 percent, what is the future value of these cash flows in year 4?

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  1. 10 December, 05:06
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    The Future value of cash flows in year 4 is $4,352

    Explanation:

    Future Value is the accumulated value of principal and compounded interest on an investment. It is calculated by following formula,

    FV = PV x (1 + r) ^n

    Year Cash Flow Future value in year 4

    1 $575 $575 x (1 + 0.08) ^3 = $724.33

    2 $1,000 $1,000 x (1 + 0.08) ^2 = $1,166.4

    3 $1,075 $1,075 x (1 + 0.08) ^1 = $1,161.0

    4 $1,300 $1,300 x (1 + 0.08) ^0 = $1,300

    $4,351.73
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