You are expecting annual cash ﬂows of $10,000 in years 1-5; $15,000 in years 6-10; and $25,000 in years 11-25. If the rate of interest is 6% compounded annually, calculate the future value of this cash
ﬂow stream.

Question

Quizplus · Accepted Answer

The future value of each cash flow segment is calculated separately using the future value formula for annuities and then summed up. The future value of the first segment ($10,000 for 5 years) is calculated and compounded to year 25, the second segment ($15,000 for 5 years) is compounded to year 25, and the third segment ($25,000 for 15 years) is calculated directly to year 25. The sum of these future values is approximately $965,333.

You Are Expecting Annual Cash ﬂOws of $10,000 in Years