Question

An investment will pay $50 at the end of each of the next 3 years, $200 at the end of Year 4, $400 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 12% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.

Present value: $  

Future value: $  

Answer 1

Inv
Discount rate	0.12
Year	0	1	2	3	4	5	6
Cash flow stream	0	50	50	50	200	400	500
Discounting factor	1	1.12	1.2544	1.404928	1.5735194	1.762342	1.973823
Discounted cash flows project	0	44.64286	39.85969	35.58901	127.10362	226.9707	253.3156
NPV = Sum of discounted cash flows
NPV Inv =	727.48
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Future Value
Last period=	6
Compounding rate	12.000%
Year	0	1	2	3	4	5	6
Cash flow stream	0	50	50	50	200	400	500
Compounding factor	1.974	1.762	1.574	1.405	1.254	1.120	1.000
Compounded cash flows	0.000	88.117	78.676	70.246	250.880	448.000	500.000
FV = Sum of compounded cash flows
FV=	1435.92
Where
Compunding factor =	(1 + rate)^(Last period-Corresponding period in years)
Compounded Cashflow=	Cash flow stream*compounding factor