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# Calculating present/ future value of given cash flows

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1. Calculate the future value of 1,535 invested today for 8 years at 6 percent.

2. What is the total present value of the following cash stream, discounted at 8 percent?

Year Amount
1 400
2 750
3 945
4 145
5 78

3. If you invested \$2,000 per year into an IRA for 30 years and received 6 percent return each year, what would the account balance be in 30 years?

#### Solution Preview

Please refer attached file for missing formulas. Formulas typed with the help of equation writer are missing here.

1.Calculate the future value of 1,535 invested today for 8 years at 6 percent.

Present Value of cash flow (PV)=\$1535
Number of periods=n=8 years
Return=i=6%
FV of single cash flow=PV*(1+i)^n
FV=1535*(1+6%)^8=\$2446.56

Future value of 1,535 invested today for 8 years at 6 percent will be \$2446.56

2.What ...

#### Solution Summary

Solution describes the steps to calculate present and future value of cash flows.

\$2.19

## Calculating present/future values of given cash flows

Problem 1
Toadies, Inc., has identified an investment project with the following cash flows.

Year Cash Flow
1 \$ 1,400
2 1,520
3 1,605
4 1,655

If the discount rate is 9 percent, what is the future value of the cash flows in year 4?

If the discount rate is 10 percent, what is the future value of the cash flows in year 4?

If the discount rate is 25 percent, what is the future value of the cash flows in year 4?

Problem 2
Wainright Co. has identified an investment project with the following cash flows.

Year Cash Flow
1 \$ 780
2 1,050
3 1,310
4 1,425

If the discount rate is 8 percent, what is the present value of these cash flows?
What is the present value at 17 percent?

What is the present value at 25 percent?

Problem 3
The appropriate discount rate for the following cash flows is 7.48 percent per year.

Year Cash Flow
1 \$ 2,500
2 0
3 3,940
4 2,190

What is the present value of the cash flows?

Problem 4
You are planning to save for retirement over the next 25 years. To do this, you will invest \$880 a month in a stock account and \$480 a month in a bond account. The return of the stock account is expected to be 10.8 percent, and the bond account will pay 6.8 percent. When you retire, you will combine your money into an account with a 7.8 percent return.

How much can you withdraw each month from your account assuming a 20-year withdrawal period?

Problem 5
If you deposit \$5,600 at the end of each of the next 20 years into an account paying 10.80 percent interest, how much money will you have in the account in 20 years?

How much will you have if you make deposits for 40 years?

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