Question Five: (25 marks) A single cash flow of $1,673.48 will be received each of the next
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Question Five: (25 marks)
- A single cash flow of $1,673.48 will be received each of the next 4 periods. For this cash flow, the appropriate discount rate / period is 7.8%.
Calculate the present value of this single cash flow in three equivalent ways.
- First, calculate the present value using a time line, where each column corresponds to a period of calendar time. (5 marks)
- Second, use a formula for the present value. (4 marks)
- Third, use Excel's PV function for the present value. (4 marks)
- A single cash flow of $932.47 is available now (in period 0). For this cash flow, the appropriate discount rate / period is 3.9%. What is the period 4 future value of this single cash flow?
- Calculate the future value of the single cash flow in three equivalent ways.
- First, calculate the future value using a time line, where each column corresponds to a period of calendar time. (4 marks)
- Second, use a formula for the future value. (4 marks)
Third, use Excel's FV function for the future value. (4 marks)
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