FV of multiple cash flows: International Shippers, Ltd, have forecast earnings of $1, 233,400, $1,345,900, and $1,455,650 for the next three years. What is the future value of these earnings if the firm's opportunity cost is 13 per cent? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

The future value can be calculated using the formula FV = CF1 x (1 + r) ^ n1 + CF2 x (1 + r) ^ n2 + CF3 x (1 + r) ^ n3, where CF is the cash flow, r is the opportunity cost, and n is the number of years. Plugging in the numbers, we get FV = 1,233,400 x (1 + 0.13) ^ 1 + 1,345,900 x (1 + 0.13) ^ 2 + 1,455,650 x (1 + 0.13) ^ 3 = $4,551,446. Therefore, the best choice is B.

FV of Multiple Cash Flows: International Shippers, Ltd, Have Forecast