Final answer:
To calculate the time 2 cash flow that will make the time 0 value of this time line equal to $2,087.15, use the present value formula with the given interest rate. A time 2 cash flow of $2,523.19 will make the time 0 value equal to $2,087.15.
Step-by-step explanation:
To calculate the time 2 cash flow that will make the time 0 value of this time line equal to $2,087.15, we can use the present value formula.
Step 1: Determine the interest rate. In this case, the interest rate is 10%.
Step 2: Use the present value formula: PV = FV / (1 + r)t, where PV is the present value, FV is the future value, r is the interest rate, and t is the number of time periods.
Step 3: Substitute the given values into the formula. $2,087.15 = FV / (1 + 0.1)2
Step 4: Rearrange the formula and solve for FV. FV = $2,087.15 * (1 + 0.1)2
Step 5: Calculate the value of FV. FV = $2,087.15 * 1.21 = $2,523.19
Therefore, a time 2 cash flow of $2,523.19 will make the time 0 value of this time line equal to $2,087.15.