Tuesday, October 16, 2012

Compute the Future Value, Knowing the Following Cash Flow.

Using a 15% interest rate, compute the value of F in the following cash flow:







SOLUTION


Looked at this way, we first solve for Fl.


Now F1 can be considered a present sum P in the diagram


The slightly different value from the preceding computation is due to rounding in the compound interest tables.

This has been a two-step solution:

One could substitute the value of F1 from the first equation into the second equation and solve for F, without computing Fl,



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1 comment:

  1. MoolamoreAugust 3, 2023 at 11:59 PM

    Cash flow analysis. To compute the future value of cash flows, we need to know the cash flow amounts, the interest rate or discount rate, and the time period over which the cash flows will occur. The future value represents the value of these cash flows at a specific point in the future, taking into account the interest or discount rate. Business cashflow forecasting software

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