Question

An investment will pay $50 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 6% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.

Present value: $   

Future value: $   

Answer 1

CF
Discount rate	6.000%
Year	0	1	2	3	4	5	6
Cash flow stream	0	50	50	50	250	350	500
Discounting factor	1.000	1.060	1.124	1.191	1.262	1.338	1.419
Discounted cash flows project	0.000	47.170	44.500	41.981	198.023	261.540	352.480
NPV = Sum of discounted cash flows
NPV CF =	945.69
Where
Discounting factor =	(1 + discount rate)^(Corresponding period in years)
Discounted Cashflow=	Cash flow stream/discounting factor

Compounding rate	6.000%
Year	0	1	2	3	4	5	6
Cash flow stream	0	50	50	50	250	350	500
Compounding factor	1.419	1.338	1.262	1.191	1.124	1.060	1.000
Compounded cash flows	0.000	66.911	63.124	59.551	280.900	371.000	500.000
FV = Sum of compounded cash flows
FV=	1341.49
Where
Compunding factor =	(1 + rate)^(Last period-Corresponding period in years)
Compounded Cashflow=	Cash flow stream*compounding factor