3) An investment project generates a cash flows of $3 million at the end of each...

Question

Question

business finance

Answer 1

Answer #1

Calculation of Future value of cashflows
Year	Cashflows	Interest rate factor@8.3%	Compounded Cashflows
A	B	C = (1+8.3%)^n	*D = BC**
1	3000000	2.049538636	6148615.908
2	3000000	1.892464114	5677392.343
3	3000000	1.747427622	5242282.865
4	3000000	1.613506576	4840519.728
5	3000000	1.489849101	4469547.302
6	3000000	1.375668606	4127005.819
7	3000000	1.270238787	3810716.361
8	3000000	1.172889	3518667
9	3000000	1.083	3249000
10	3000000	1	3000000
Future value of Cashflows			44083747.33

Note:
Interest rate factor calculation
first cahflow occurred at the end of first year and interest can be earned till 10th year
(i.e. 9 years ). Interest rate factor is (1+8.3%)^9 = 2.049538636
Lekewise 10th year cashflow occur at the end of year and interest is not earned as we
are finding future value at the end of 10th year

Answer 2

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