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Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $1,030 2 1,260 3 1,480 4 2,220 a. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? b. If the discount rate is 11 percent, what is the future value of these cash flows in Year 4? c. If the discount rate is 24 percent, what is the future value of these cash flows in Year 4?

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  1. Today, 06:58
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    a. If the discount rate is 8 percent, the future value of these cash flows in Year 4 will be $6,586

    b. If the discount rate is 11 percent, what is the future value of these cash flows in Year 4 will be $6,824.

    c. If the discount rate is 24 percent, what is the future value of these cash flows in Year 4 will be $7,956.

    Explanation:

    Cash Flow

    Year 1: $1,030

    Year 2: $1,260

    Year 3: $1,480

    Year 4: $2,220

    a. If the discount rate is 8 percent, the future value of these cash flows in Year 4

    Future Value = (1030 X 1.08^3) + (1260 X 1.08^2) + (1480 X 1.08) + (2220)

    Future Value = 1298 + 1470 + 1598 + 2220 = $6,586

    b. If the discount rate is 11 percent, what is the future value of these cash flows in Year 4

    Future Value = (1030 X 1.11^3) + (1260 X 1.11^2) + (1480 X 1.11) + (2220)

    Future Value = 1409 + 1552 + 1643 + 2220 = $6,824

    c. If the discount rate is 24 percent, what is the future value of these cash flows in Year 4

    Future Value = (1030 X 1.24^3) + (1260 X 1.24^2) + (1480 X 1.24) + (2220)

    Future Value = 1964 + 1937 + 1835 + 2220 = $7,956
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