Question

Wells, Inc., has identified an investment project with the following cash flows. Year هه نا تما م Cash Flow $ 930 1,160 1,380 2,120 eBook eferences 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

Hello,

Please take a note of the below assumptions:

• Cash flows are assumed to be occuring at the end of year
• Thus, FV of cash flow of year 4 is same as provided

Please refer to below snapshot for solution:

Year 7% Cash Flow Time Remianing to Year 4 13% 22% 1 $930.00 3 $1,139.29 $1,341.89 $1,688.74 2 $1,160.00 $1,328.08 $1,481.20 $1,726.54 31 $1,380.00 11 $1,476.60 $1,559.40 $1,683.60 4 $2,120.00 $2,120.00 $2,120.00 $2,120.00 Total Future Value $6,063.97 $6,502.50 $7,218.88

Year Cash Flow 930 1160 1380 2120 Time Remianing to Year 4 =4-B3 =4-B4 =4-B5 =4-B6 0.07 =$C3*(1+$2)^$D3 =$C4*(1+E$2) $D4 | =$C5*(1+$2)^$D5 =$C6*(1+$2)^$D6 =SUM(E3:56) 0.13 =$C3*(1+F$2)^$D3 =$C4*(1+F$2) $D4 =$C5*(1+F$2)^$05 =$C6*(1+F$2)^$06 =SUM(F3:F6) 0.22 =$C3*(1+G$2) $D3 =$C4*(1+G$2) $D4 =$C5"(1+G$2)^$D5 =$C6*(1+G$2)^$D6 =SUM(G3:56) Total Future Value