Final answer:
To compute the future value of different payments received in the future, apply the formula involved in calculating compound interest. The formula is Future Value = Principal × (1 + interest rate)^time for each separate payment. Add the future values together to get the total future value of all payments.
Step-by-step explanation:
The question is asking to calculate the future value of payments received at different times in the future, using a given interest rate. To find the future value, you can use the formula: Future Value = Principal × (1 + interest rate)time. Let's assume an interest rate of 15%, and apply it to payments of $15 million in the present, $20 million in one year, and $25 million in two years.
- To calculate the future value of $15 million received now (time = 0), the future value is simply $15 million, as there's no interest accrued yet.
- For $20 million received in one year, the future value would be: $20 million × (1 + 0.15)1 = $20 million × 1.15 = $23 million.
- Finally, for $25 million received in two years, the future value would be: $25 million × (1 + 0.15)2 = $25 million × 1.3225 = $33.0625 million.
Add up these future values to find the total future value of all payments. The compound interest formula shows the growth of an investment or payments over a period of time with the effects of compounding. Table C1, referenced in the question, likely provides additional specific information to guide these calculations.