Fuente, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $575 2 1,000 3 1,075 4 1,300 a. If the discount rate is 8 percent, what is the future value of these cash flows in year 4?

The Future value of cash flows in year 4 is $4,352

Explanation:

Future Value is the accumulated value of principal and compounded interest on an investment. It is calculated by following formula,

FV = PV x (1 + r) ^n

Year Cash Flow Future value in year 4

1 $575 $575 x (1 + 0.08) ^3 = $724.33

2 $1,000 $1,000 x (1 + 0.08) ^2 = $1,166.4

3 $1,075 $1,075 x (1 + 0.08) ^1 = $1,161.0

4 $1,300 $1,300 x (1 + 0.08) ^0 = $1,300

$4,351.73