Wells, Inc., has identified an investment project with the following cash flows. Year Cash Flow 1 $ 865 2 1,040 3 1,290 4 1,385 a. If the discount rate is 8 percent, what is the future value of these cash flows in Year 4? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) b. What is the future value at an interest rate of 11 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.) c. What is the future value at an interest rate of 24 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e. g., 32.16.)

Future value is calculated using the formula:

FV = PV * (1+r) n

FV = Future value, PV = Present vlaue, r = interest rate

C1 = 865, C2 = 1040, C3 = 1290, C4 = 1385

FV of C1 at t:4 = C1 * (1+r) 3

FV of C2 at t:4 = C2 * (1+r) 2

FV of C3 at t:4 = C3 * (1+r) 1

FV of C4 at t:4 = C4 * (1+r) 0 = C4

Future value is the sum of Future values of all the cash flows

Future value = C1 * (1+r) 3 + C2 * (1+r) 2 + C3 * (1+r) 1 + C4

a. When discount rate = r = 8%

Future value = C1 * (1+r) 3 + C2 * (1+r) 2 + C3 * (1+r) 1 + C4 = 865 * (1.08) 3 + 1040 * (1.08) 2 + 1290 * (1.08) 1 + 1385

Future value = 1089.65088 + 1213.056 + 1393.2 + 1385 = 5080.90688

b. When Discount rate = r = 11%

Future value = C1 * (1+r) 3 + C2 * (1+r) 2 + C3 * (1+r) 1 + C4 = 865 * (1.11) 3 + 1040 * (1.11) 2 + 1290 * (1.11) 1 + 1385 = 1183.000815 + 1281.384 + 1431.9 + 1385 = 5281.284815

c. When discount rate = r = 24%

Future value = C1 * (1+r) 3 + C2 * (1+r) 2 + C3 * (1+r) 1 + C4 = 865 * (1.24) 3 + 1040 * (1.24) 2 + 1290 * (1.24) 1 + 1385

Future value = 1649.22976 + 1599.104 + 1599.6 + 1385 = 6232.93376