Wells, Inc., has identified an investment project with the following cash flows. Year Cash Flow $ 1,080 1,310 1,530 2,270 1 a. If the discount rate is 9 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 12 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 23 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Future value at 9 percent b. Future value at 12 percent c. Future value at 23 percent $ 4,881.70 234

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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B and C

Wells, Inc., has identified an investment project with the following cash flows.
Year
Cash Flow
$ 1,080
1,310
1,530
2,270
1
2
3
4
a. If the discount rate is 9 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 12 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 23 percent? (Do not round intermediate
calculations and round your answer to 2 decimal places, e.g., 32.16.)
a. Future value at 9 percent
b. Future value at 12 percent
c. Future value at 23 percent
$
4,881.70
Transcribed Image Text:Wells, Inc., has identified an investment project with the following cash flows. Year Cash Flow $ 1,080 1,310 1,530 2,270 1 2 3 4 a. If the discount rate is 9 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 12 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 23 percent? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Future value at 9 percent b. Future value at 12 percent c. Future value at 23 percent $ 4,881.70
Expert Solution
Step 1

Future value at year 4 = [Year 1 cash flow x (1 + r)3] + [Year 2 cash flow x (1 + r)2] + [Year 3 cash flow x (1 + r)] + Year 4 cash flow

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