$300 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 11%

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 16P
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An investment will pay $150 at the end of each of the next 3 years, $250 at the end of Year 4,
$300 at the end of Year 5, and $500 at the end of Year 6. If other investments of equal risk earn 11%
annually, what is its present value? Its future value 

Please provide full solution not on excel 

Expert Solution
Step 1

The value of money at present is known as the present worth of the money while the value of money in sometime in future is known as future worth of money. The present value of money is computed by discounting the future cash flows with the appropriate discounting rate.

The formula to compute the present value of the future cash flow is provided below.

Where,

The future value is FV.

The present value is PV.

The interest rate is i.

The number of periods is n.

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