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What is the future value (as at year 4) of the following cash flows, given an interest rate of 5% p.a.? Year 1 Cash flow $160 $340 $280 O a. $867 O b. $813 O c. $819 O d. $854

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 23E: Assume that an investment of 100,000 produces a net cash flow of 60,000 per year for two years. The...

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Concept explainers

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.

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What is the future value (as at year 4) of the following cash flows, given an interest rate of 5% p.a.?
Year
1
2
3
Cash flow
$160
$340
$280
a. $867
O b. $813
c. $819
O d. $854

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