Problem 4-28 Moving Cash Flows (LG4-5) What is the value in year 10 of a $350 cash flow made in year 6 if interest...

Question

Question

Answer 1

Answer #1

Solution :

Future Value in 10 year - FV₁₀

Present Value made in year 6 - PV

Interest rate - i

Period - n

Equation to calculate Future Value in year 10

FV_{10 =} PVx (1 + i)ⁿ

PV = $ 350 , i = 12/100 i.e. 0.12 , n = 10-6 i.e. 4

FV₁₀ = $350 x (1 + 0.12)⁴

FV_{10 =} $350 x (1.12)⁴

FV_{10 =} $350 x (1.573519)

FV_{10 =} $550.7318

FV_{10 =} $550.73 (rounded to two decimals)

Answer 2

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