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20 October, 21:42

Oriole, Inc., management expects the company to earn cash flows of $11,800, $14,000, $18,200, and $19,000 over the next four years. If the company uses an 10 percent discount rate, what is the future value of these cash flows at the end of year 4? (Round answer to 2 decimal places, e. g. 15.25. Do not round factor values.)

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  1. 20 October, 23:35
    0
    Future Value of Cash Flows = $71,665.80

    Explanation:

    Cash Flows:

    Year 1 = $11,800

    Year 2 = $14,000

    Year 3 = $18,200

    Year 4 = $19,000

    Discount Rate = 10%

    Future Value of Cash Flows = $11,800 * 1.10^3 + $14,000 * 1.10^2 + $18,200 * 1.10^1 + $19,000 * 1.10^0

    Future Value of Cash Flows = $11,800 * 1.331 + $14,000 * 1.21 + $18,200 * 1.10 + $19,000 * 1

    Future Value of Cash Flows = $15,705.8 + $16,940 + $20,020 + $19,000

    Future Value of Cash Flows = $71,665.80

    So, the future value of these cash flows at the end of year 4 is $71,665.80
  2. 21 October, 00:08
    0
    The future value of these cash flows at the end of year 4 is $71,885.80

    Explanation:

    In order to calculate the future value of these cash flows at the end of year 4 we would have to use the following formula:

    n



    FV = i=1 [CFi * (1 + r) (n - i) ]

    FV = [$11,800 * (1 + 0.10) ∧ (4-1) ] + [$14,000 * (1 + 0.10) ∧ (4-2) ] + [$18,200 * (1 + 0.10) (4-3) ] + [$19,000 * (1 + 0.10) (4-4) ]

    FV = $15,705.80 + $16,940 + $20,020 + $19,000

    FV=$71,665.80

    The future value of these cash flows at the end of year 4 is $71,885.80
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