CFIN (with MindTap Finance, 1 term (6 months) Printed Access Card) (MindTap Course List)
CFIN (with MindTap Finance, 1 term (6 months) Printed Access Card) (MindTap Course List)
6th Edition
ISBN: 9781337407342
Author: Scott Besley, Eugene Brigham
Publisher: Cengage Learning
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Chapter 4, Problem 16PROB
Summary Introduction

The annual cash flows for year 1 is $500; year 2 is $400; and year 3 is $300. The opportunity cost is 7.5%.

Future value of an annuity is the total future value of a series of periodic payments made at the end of each year at a given interest rate for a specified period.

FV=[(PMT×(1+r)n1)+(PMT×(1+r)n2)+(PMT×(1+r)n3)]

Future value of an annuity due is the total future value of a series of periodic payments made at the beginning of each year at a given interest rate for a specified period.

FV=[(PMT×(1+r)n0)+(PMT×(1+r)n1)+(PMT×(1+r)n2)]

Here,

The future value is “FV”.

The annual payment on investment is “PMT”.

The interest rate is “r”.

The maturity period is “n”.

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