Question

You expect to receive the cash flows described in the table below. The discount rate is 10% per year. Fill in the table with the future value at the end of year 4 of each of the cash flows.

Answer 1

To calculate the future value at the end of year 4 for each cash flow, use the formula for future value, Future Value = Cash Flow * (1 + Discount Rate)^Number of Periods. Using the discount rate of 10% per year, the future values at the end of year 4 for each cash flow are Cash Flow A: $146.41, Cash Flow B: $292.82, Cash Flow C: $439.23, and Cash Flow D: $585.64.

Step-by-step explanation:

To calculate the future value at the end of year 4 for each cash flow, we need to use the formula for future value:

Future Value = Cash Flow * (1 + Discount Rate)^Number of Periods

Using the discount rate of 10% per year, we can calculate the future value of each cash flow in the table provided.

- Cash Flow A: $100 * (1 + 0.10)^4 = $146.41

- Cash Flow B: $200 * (1 + 0.10)^4 = $292.82

- Cash Flow C: $300 * (1 + 0.10)^4 = $439.23

- Cash Flow D: $400 * (1 + 0.10)^4 = $585.64

Therefore, the future value at the end of year 4 for each cash flow is:

- Cash Flow A: $146.41

- Cash Flow B: $292.82

- Cash Flow C: $439.23

- Cash Flow D: $585.64