question 6qSolutionAnswer Cash Flows Year 1 433676 Year 2

question 6.q

Answer:

Cash Flows:

Year 1 = $433,676
Year 2 = $478,452
Year 3 = $475,455
Year 4 = $478,326
Year 5 = $535,444

Interest rate = 7.8%

Future Value = $433,676*1.078^4 + $478,452*1.078^3 + $475,455*1.078^2 + $478,326*1.078 + $535,444
Future Value = $2,788,620.68

Present Value = $433,676/1.078 + $478,452/1.078^2 + $475,455/1.078^3 + $478,326/1.078^4 + $535,444/1.078^5
Present Value = $1,915,559.48