Question

Refer to the Cash Flow Diagram below to calculate the value of F at the end of year 10:

0______1____2______3_____4________5_____6______7________8_______9________________10 F=? i=5%

at 0) 6000 at 2) 3,000 at 5)4,000 These values have a downward arrow at 10 the arrow is up

Answer 1

As per the question the cash outflows at

0^th year = 6000

2^nd year = 3000

5^th year = 4000

Calculate the amount you receive (inflow) at the 10 year at interest rate of 5%.

Future Value = 6000 (1+0.05) ¹⁰ + 3000 (1+0.05) ⁸ + 4000 (1+0.05) ⁵

Future Value = 19310.86 or 19311

Alternatively

Future Value = 6000 (F/P, 5%, 10) + 3000 (F/P, 5%, 8) + 4000 (F/P, 5%, 5)

Future Value = 6000 (1.6289) + 3000 (1.4775) + 4000 (1.2763)

Future Value = 19311