Question

At a rate of 6.5%, what is the future value of the following cash flow stream?
Year 0 1 2 3 4
CFs: $0 $75 $225 $0 $300
a. $582.83.
b. $553.69.
c. $613.51.
d. $645.80.
e. $526.01.

Answer 1

Answer:

Total future value= $645.8

Explanation:

Giving the following information:

Year 0 1 2 3 4

CFs: $0 $75 $225 $0 $300

Interest rate= 6.5%

To calculate the future value, we need to use the following formula on each cash flow:

FV= PV*(1+i)^n

Cf1= 75*1.065^3= 90.60

Cf2= 225*1.065^2= 255.20

Cf3= 0

Cf4= 300

Total future value= $645.8