Question

Using an excel document and formula: Cannonier, Inc., has identified an investment project with the following cash flows. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? What is the future value at a discount rate of 11 percent? At 24 percent?

Year Cash Flow 1 $1,225

Year 2 1,345

Year 3 1,460

Year 4 1,590

Answer 1

	Future Value = Present Value*((1+r)^t)
1)	where r is the interest rate that is .08 and t is the time period in years.
	Future value of these cash flows in year 4 = sum of the future values
	t	3	2	1	0
	Year	1	2	3	4
	cash flow	1225	1345	1460	1590
	future value	1543.147	1568.808	1576.8	1590
	Future value of these cash flows in year 4	6278.755
	If the discount rate is 8 percent, the future value of these cash flows in Year 4 is $6278.76.
2)	where r is the interest rate that is .11 and t is the time period in years.
	Future value of these cash flows in year 4 = sum of the future values
	t	3	2	1	0
	Year	1	2	3	4
	cash flow	1225	1345	1460	1590
	future value	1675.348	1657.175	1620.6	1590
	Future value of these cash flows in year 4	6543.122
	If the discount rate is 11 percent, the future value of these cash flows in Year 4 is $6543.12.
3)	where r is the interest rate that is .24 and t is the time period in years.
	Future value of these cash flows in year 4 = sum of the future values
	t	3	2	1	0
	Year	1	2	3	4
	cash flow	1225	1345	1460	1590
	future value	2335.614	2068.072	1810.4	1590
	Future value of these cash flows in year 4	7804.086
	If the discount rate is 24 percent, the future value of these cash flows in Year 4 is $7804.09.