Question

Given the following cash inflow at the end of each year, what is the future value of this cash flow at 3%, 10% and 18% interest rates at the end of year 7?

Year   Cash Inflow
1 $15,000
2 $22,000
3 $28,000
4 $0
5 $0
6 $0
7 $160,000

What is the future value of this cash flow at 3% interest rate at the end of year 7?

What is the future value of this cash flow at 10% interest rate at the end of year 7?

What is the future value of this cash flow at 18% interest rate at the end of year 7?

round to the nearest cent

Answer 1

At 3% Interest Rate:

FV of year 1 cashflow = 15000*(1+3%)^6 = 15000*1.03^6 = 15000*1.1941 = $17910.78

FV of year 2 cashflow = 22000*(1+3%)^5 = 22000*1.03^5 = 22000*1.1593 = $25504.03

FV of year 3 cashflow = 28000*(1+3%)^4 = 28000*1.03^4 = 28000*1.1255 = $31514.25

FV of year 7 cashflow = 160000*(1+3%)^0 = 160000*1.03^0 = 160000*1 = $160000

Total FV = 17910.78+25504.03+31514.25+160000 = $234929.06

At 10% Interest Rate:

FV of year 1 cashflow = 15000*(1+10%)^6 = 15000*1.10^6 = 15000*1.7716 = $26573.41

FV of year 2 cashflow = 22000*(1+10%)^5 = 22000*1.10^5 = 22000*1.6105 = $35431.22

FV of year 3 cashflow = 28000*(1+10%)^4 = 28000*1.10^4 = 28000*1.4641 = $40994.8

FV of year 7 cashflow = 160000*(1+10%)^0 = 160000*1.10^0 = 160000*1 = $160000

Total FV = 26573.41+35431.22+40994.8+160000 = $262999.43

At 18% Interest Rate:

FV of year 1 cashflow = 15000*(1+18%)^6 = 15000*1.18^6 = 15000*2.6996 = $40493.31

FV of year 2 cashflow = 22000*(1+18%)^5 = 22000*1.18^5 = 22000*2.2878 = $50330.67

FV of year 3 cashflow = 28000*(1+18%)^4 = 28000*1.18^4 = 28000*1.9388 = $54285.78

FV of year 7 cashflow = 160000*(1+18%)^0 = 160000*1.18*^0 = 160000*1 = $160000

Total FV = 40493.31+50330.67+54285.78+160000 = $305109.76