Question

In: Finance

Paradise, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1...

Paradise, Inc., has identified an investment project with the following cash flows.
Year Cash Flow
1 $525             
2   950             
3 1,050             
4     1,275             
Required:
(a)

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

        (Click to select)  3,800.00  4,052.49  4,329.00  384.00  4,278.28

(b)

What is the future value at a discount rate of 19 percent?

        (Click to select)  3,800.00  4,279.74  5,657.86  4,279.76  4,754.50

(c)

What is the future value at discount rate of 29 percent?

        (Click to select)  6,885.25  5,276.48  3,800.00  5,337.41  5,398.93

Solutions

Expert Solution

Sol:

a)

Year

Cash Flows

FV factor @10%

Future value

1

$525

1.331

$698.78

2

$950

1.21

$1,149.50

3

$1,050

1.1

$1,155.00

4

$1,275

1

$1,275.00

Future value Total

$4,278.28

Future value will be $4,278.28

b)

Year

Cash Flows

FV factor @19%

Future value

1

$525

1.685159

$884.71

2

$950

1.4161

$1,345.30

3

$1,050

1.19

$1,249.50

4

$1,275

1

$1,275.00

Future value Total

$4,754.50

Future value will be $4,754.50

c)

Year

Cash Flows

FV factor @29%

Future value

1

$525

2.146689

$1,127.01

2

$950

1.6641

$1,580.90

3

$1,050

1.29

$1,354.50

4

$1,275

1

$1,275.00

Future value Total

$5,337.41

Future value will be $5,337.41

Workings


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