4 Compute the future worth for the following cash flows at y

(4) Compute the future worth for the following cash flows (at year 5). 5x 3x 2x 4 js15%

Solution

n is the number of years remaining

Future value of cash flow at the end of 5th year is 22.09x

a	b	c	d	e=b*d
Year	Cash flow	Compounding @15%	Compounding @15%	compounded cash flow
1	5x	1.154 =	1.75	8.75x
2	4x	1.153 =	1.52	6.08x
3	3x	1.152=	1.32	3.96x
4	2x	1.151=	1.15	2.30x
5	x	1.150=	1	x
		Future value of cash flow/compounded cash flow		22.09x
Future value of cash flow=Present Value(1+r)n
where r is rate of interest
n is the number of years remaining Future value of cash flow at the end of 5th year is 22.09x