Havana Inc has identified an investment project with the fol

Havana, 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 12? (Hint: Be careful with the number of periods.) If the picture doesn\'t load, the cash flows shown in the picture are as follows: 910 in year 1; 1140 in year 2; 1360 in year 3; and 2100 in year 4.

Solution

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

Hence

A=910*(1.08)^11+$1140*(1.08)^10+$1360*(1.08)^9+$2100*(1.08)^8

=(910*2.331638997)+(1140*2.158924997)+(1360*1.999004627)+(2100*1.85093021)

which is equal to

=$11188.57(Approx).