Question

If today is Year 0, what is the future value of the following cash flows 6 years from now? Assume an interest rate of 5.0 percent per year.

Year	Cash Flow
2	$8,500
3	$9,300
6	$7,100

   

Group of answer choices

• $21,041.57

• $23,266.73

• $25,653.05

• $28,197.72

• $30,143.44

Answer 1

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

A=8500*(1.05)^4+9300*(1.05)^3+7100

=$28197.72(Approx)