Question

Present and Future Value of an Uneven Cash Flow Stream

An investment will pay $100 at the end of each of the next 3 years, $400 at the end of Year 4, $600 at the end of Year 5, and $800 at the end of Year 6. If other investments of equal risk earn 6% annually. What is its present value? Round your answer to the nearest cent.

What is its future value? Round your answer to the nearest cent. $

Answer 1

All cashfow units in dollars; discount rate is 6%

Year	Cashflow $	Discount factor	Present value of cashflow $
1	100	1/(1+6%)^1	94.34
2	100	1/(1+6%)^2	88.99
3	100	1/(1+6%)^3	83.96
4	400	1/(1+6%)^4	316.84
5	600	1/(1+6%)^5	448.35
6	800	1/(1+6%)^6	563.97
	Total future value = 2100$		Total present value = 1596.45$