Question

The value today of the following cash flows is $5,850 56 at an interest rate of 4.2 percent. What is the value of the Year 3 cash fow 16 Year Cash Flow $1,425 2 1,525 3. ot453 41 2,10s Multiple Choice $795 56 $1.37779 $3402 .26 $1.4627 $1292 87

Answer 1

Solution Crivers & PU = 85,850.56 Cash flow Year) = $1,425. Year 2 = $ 1.525 Year 3 - 2 st Year" = $2,105 Rate = 4.2.1. Pu= Cole SAPLI Ctoon 5.850.56=1425 + 1525 (1+0,042) (1+0.042) 2 (E3 t. (1+0.0423 h oxlt 2, los douche Ll+0.042)" 5,850.56= 1,425 (1.042) 1525 +(F3 +2, los 11.642)2 (1.042)3 (1042) 5,850.56=1425 1.042 + 1,525 1,0858 + (F3 1.1314 + 2,105 1.1789. 5,850.56 = 1,36 7.56 + 1,404.49+ (F3 + 1,785.56 1.1314 5,850.56= 4557.61+ (F₂ 1.1314

CF3 =5,850.56-4557.6) 3.1314 (F3 1.1314 = 1292.95 CF3 = 1292.95 x 1.1314 => [$ 1,462.84) .: The value of the year 3 cash flow is 1$ 1,462.73 LYS • Note > px The answer from Calculation shown above is different from option. is due to rounding off.