Chandler Corp. is expecting a new project to start producing cash flows, beginning at the end of this year. They expect cash flows to be as follows: $643,547 at the end of year 1, $678,214 at the end of year 2, $775,908 at the end of year 3, $778,326 at the end of year 4, and $735,444 at the end of year 5. If they can reinvest these cash flows to earn a return of 8.2 percent, what is the future value of this cash flow stream at the end of five years?
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Chandler Corp. is expecting a new project to start producing cash flows, beginning at the end of this year. They expect cash flows to be as follows: $643,547 at the end of year 1, $678,214 at the end of year 2, $775,908 at the end of year 3, $778,326 at the end of year 4, and $735,444 at the end of year 5. If they can reinvest these cash flows to earn a return of 8.2 percent, what is the
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