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What is the future value (in $) of cash flows 1-3 at the end of year...

What is the future value (in $) of cash flows 1-3 at the end of year 3, assuming a 6% interest rate (compounded annually)? End of year Cash flow 1 $500 2 841 3 720 4 3,500 5 1,250 6 4,530 7 2,350

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Answer #1

Future value of cash flow at the end of year 3 = CF1 * (1+r)^2 + CF2 * (1 + r)^1 + CF3 * (1 +rI)^0

= ($500 * (1 + 0.06)^2) + ($841 * (1 + 0.06)^1) + ($720 * (1 + 0.06)^0)

= $561.8 + $891.46 + $720

= $2,173.26


Future value of cash flow at the end of year 3 = $2,173.26

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