Question

From the cash flow table below, answer the following questions. All investments are represented by negative net cash flow, all operating incomes are represented by positive net cash flow.

Time, periods	Net Cash Flow
0	-200
1	250
2	75
3	120
4	-50
5	30
6	200

a) If money is worth 12% per period to you, what is the future value of?? total investment at the end of the last period?

b) With the same money worth as a), what is the present value of total operating income at time 0?

Answer 1

From the cash flow table below, answer the following questions. All investments are represented by negative net cash flow; all operating incomes are represented by positive net cash flow.

Time, periods          Net Cash Flow

0                           -200

1                           250

2                           75

3                           120

4                           -50

5                           30

6                           200

a) If money is worth 12% per period to you, what is the future value of?? total investment at the end of the last period?

Future Value = -200 (F/P, 12%, 6) + 250 (F/P, 12%, 5) + 75 (F/P, 12%, 4) +

120 (F/P, 12%, 3) – 50 (F/P, 12%, 2) + 30 (F/P, 12%, 1) + 200

Future Value = -200 (1.9738) + 250 (1.7623) + 75 (1.5735) +

120 (1.4049) – 50 (1.2544) + 30 (1.1200) + 200

Future Value =503

b) With the same money worth as a), what is the present value of total operating income at time 0?

Present Value of the Future Value = 503 (P/F, 12%, 6)

Present Value of the Future Value = 503 (0.5066) = 255

*Verification – 255 (F/P, 12%, 6) = 503

255 (1.9738) = 503