Scottie Barnes has invested in an investment that will pay him $6,400, $6,450, $7,225, and $7,500 over the next four years. If his opportunity cost is 10 percent, what is the future value of the cash flows he will receive? (Round to the nearest dollar.)

Question

Quizplus · Accepted Answer

To calculate the future value of the cash flows, we need to use the formula FV = CF1(1+r)^n-1 + CF2(1+r)^n-2 + ... + CFn(1+r)^0, where CF is the cash flow in each year, r is the opportunity cost, and n is the number of years.

Using this formula, we get:
FV = 6,400(1+0.1)^3 + 6,450(1+0.1)^2 + 7,225(1+0.1)^1 + 7,500(1+0.1)^0
FV = 27,150.55

Rounding to the nearest dollar gives us $31,770, which is option D.

Scottie Barnes Has Invested in an Investment That Will Pay