Question

What is the present value and future value of the following cash flow stream at a rate of 8.00%? Years: 0 1 2 3 4 CFs: $0 $75 $225 $0 $500

Answer 1

Present value=Cash flows*Present value of discounting factor(rate%,time period)

=75/1.08+225/1.08^2+500/1.08^4

=$629.86(Approx)

We use the formula:  
A=P(1+r/100)^n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

Future value=629.86*(1.08)^4

=$856.92(Approx)