Question

Assume that a financial asset gives its owner the following cash flows which are invested using the compound interest method: year zero, 15,041 dollars outflow; year one, 44,780 dollars inflow; year two, 15,784 dollars inflow; year three, 52,390 dollars inflow; year four: 13,458 dollars inflow. Given that the current yield required for similar financial assets is 6% per year, compute the value of this asset at time 3 taking into account past and future cash flows. (note: round your answer to the nearest cent and do not include spaces, currency signs, or commas)

Answer 1

$114,218.

Step-by-step explanation:

Year 0, cash outflow = $15,041

Year 1, cash inflow = $44,780

Year 2, cash inflow = $15,784

Year 3, cash inflow = $52,390

Year 4, cash inflow = $13,458

R = 6%

Value of the asset in year 3 = -15,041*(1+6%)^3 + 44,780*(1+6%)^2 + 15,784*(1+6%) + 52,390 + 13,458/(1+6%)

Value of the asset in year 3 = -15,041*1.191016 + 44,780*1.1236 + 15,784*1.06 + 52,390 + 13,458/1.06

Value of the asset in year 3 = -17,914.07 + 50,314.81 + 16,731.04 + 52,390 + 12,696.23

Value of the asset in year 3 = $114,218.01