Question

You put the poetry book down and think to yourself "ever since I inherited $1.3M, I can do things like read poems." You don't know what the poem means but whatever. You decide to use all your money to make more money. You value money at 10% per year unless stated otherwise. You look back at your notebook of things to do with money and decide:

Answer 1

We have to calculate the present values of all future cash flows so that we can find answer to the quation Present value of $2.2M 22,00,000.00 = (1+0.10)^8 22,00,000.00 1.10^8 By solving we get 10,26,316.00 Present Values 145454 132231 = 120210 Present values of All future Cash inflows: Year1 160000 1.1 Year2 160000 1.1^2 Year3 160000 1.113 Similarly we can find all year values and we get: Year4 Year: (Lets Assume Present value X) Year6 Year7 Years 109282 х 90316 82105 74641 Therefore in order to get project worth Present Outflows Must be Minimum Equals to present Inflows Hence Equation becomes like this Present values of all future cash inflows Present value of future cash outflows 145454+132231+120210+109282+X+90316+82105+74641 1026316 By solving Above equation we get value of X: X 272077 Hence Present value for Year 5 is 272077 = And to make project worthable minimum future cash inflow for year 5 should be: 272077(1+0.10)^5 4,38,182 = $438 Thousand