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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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hyderali230

Answer:

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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