Al-Salam is expecting the following cash flows starting at the end of the year BD 133,245; 152,709; 161,554, and 200,760. If their discount rate is 9.4%, find the future value of these cash flows. For the toolbar, press ALT-F10 (PC) or ALTFN+F10 (Mac). 

Solution

Cashflows:

Year ending 1 : 133245

Year ending 2: 152709

Year ending 3: 161554

Year ending 4: 200760

Discount rate = 9.4%

We know that future value for mth year of a present value standing at nth year is:

Present value at nth year x(1+r)^m-n

here r = interest rate

Hence future value of given cashflows i.e. future value at the end of 4 year:

= 133245x"(1+0.094)^3" + 152709x"(1+0.094)^2"+161554x"(1+0.094)^1"+ 200760x "(1+0.094)^0"

= 174462.82+182767.63+176740.08+200760

=BD 734730.53

hence future value of given cashflows is BD 734730.53

* Power 0 of any value makes the value 1.