Question

Wells, Inc., has identified an investment project with the following cash flows. Year Cash Flow $ 970 1,200 1,420 2,160 imt a. If the discount rate is 7 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the future value at an interest rate of 13 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What is the future value at an interest rate of 22 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Future value at 7 percent b. Future value at 13 percent c. Future value at 22 percent

Answer 1

FV =Sum [ CF * FVF(r%, n) ]

FVF(r%, n) = (1+r)^n

Part A:

Year	CF	Gap	FVF@7%	FV oCF
1	$    970.00	3	1.2250	$ 1,188.29
2	$ 1,200.00	2	1.1449	$ 1,373.88
3	$ 1,420.00	1	1.0700	$ 1,519.40
4	$ 2,160.00	0	1.0000	$ 2,160.00
FV of CFs				$ 6,241.57

Part B:

Year	CF	Gap	FVF@13%	FV oCF
1	$    970.00	3	1.4429	$ 1,399.61
2	$ 1,200.00	2	1.2769	$ 1,532.28
3	$ 1,420.00	1	1.1300	$ 1,604.60
4	$ 2,160.00	0	1.0000	$ 2,160.00
FV of CFs				$ 6,696.49

Part C:

Year	CF	Gap	FVF@22%	FV oCF
1	$    970.00	3	1.8158	$ 1,761.37
2	$ 1,200.00	2	1.4884	$ 1,786.08
3	$ 1,420.00	1	1.2200	$ 1,732.40
4	$ 2,160.00	0	1.0000	$ 2,160.00
FV of CFs				$ 7,439.85

Pls comment, if any further assistance is required.