Moving cash FlowS 2 What is the value in year 4 of a $1,000 cash flow made in year 6 if interest rates are 8 percent? 3 LG4-5: Move cash flows from one year to another. 4 5 Assumptions: 6 CF Yr 6 = FV(6) 7 i 8 N 9 10 Solution 1: 11 12 13 14 Period 15 Cash flow 16 17 18 Solution 2: 19 $1,000.00 8.00% Schedule the Year 6 cash flow on a time line. Discount by 8% one year at a time using PV formula to Year 4. 20 21 PV(4) 0 Apply PV formula directly 2 (Year 6-Year 4) $857.34 1 2 3 4 6 ++

2. What is the value in year 4 of a $1,000 cash flow made in year 6 if interest rates are 8 percent? 3. LG4-5: Move cash flows from one year to another