Chapter 6
VIII.
Questions and Problems
Basic
6.1.
Future Value with Multiple Cash Flows:
Konerko Inc. expects to earn cash flows of
$13,227, $15,611, $18,970, and $19,114 over the next four years. If the company uses an
8 percent discount rate, what is the future value of these cash flows at the end of year 4?
Solution:
0
1
2
3
4
├───────┼────────┼───────┼────────┤
$13,227
$15,611
$18,970
$19,114
n = 4;
i
=8%.
6.2.
Future Value with Multiple Cash Flows:
Ben Woolmer has an investment that will pay
him the following cash flows over the next five years - $2,350, $2,725, $3,128, $3,366,
and $3,695. If his investments typically earn 7.65 percent, what is the future value of this
set of cash flows at the end of five years?
Solution:
0
1
2
3
4
5
├───────┼────────┼───────┼────────┼───────┤
$2,350
$2,725
$3,128
$3,366
$3,695
n = 5;
i
=7.65%.
1
$74,472.48
=
+
+
+
=
+
+
+
=
114
,
19
$
60
.
487
,
20
$
67
.
208
,
18
$
21
.
662
,
16
$
114
,
19
$
)
08
.
1
(
970
,
18
$
)
08
.
1
(
611
,
15
$
)
08
.
1
(
227
,
13
$
FV
1
2
3
4