Question

d) $1.36 c) $1.49 € 1o27 000 24) You are expecting annual cash flows of $80,000 in years 1-3; $95.000 in ycars 6-20; and $105,000 in ycars 21-50. If the rate of interest is 10% compounded annually. calculate the future value of this cash flow stream. a) 5103.54 million 49$,vos b) $104.54 million. $S105.54 million. d) $106.54 million. c) $107.54 million. EZ 67 672

Answer 1

Present Value = $ 80,000 * 1/(1.1) ^ 1 + $ 80,000 * 1/(1.1) ^2 +..$ 80,000 * 1/(1.1) ^5 +$ 95000 *1/(1.1) ^ 6 +$ 95000 *1/(1.1) ^7+....+$ 95000 *1/(1.1) ^20 + $ 105000 *1/(1.1) ^21+ $ 105000 *1/(1.1) ^22+....+ $ 105000 *1/(1.1) ^50

= $ 899,058.08

Future Value = Present Value * ( 1+ Rate of Interest) ^ Time

= $ 899,058.08 * ( 1+10%) ^ 50

= $ 105,541,194.80

= $ 105.54 Million

Hence the correct answer is c) $ 105.54 Million