Toadies, Inc., has identified an investment project with the following cash flows.

Toadies, Inc., has identified an investment project with the following cash flows.

Year Cash Flow
1 $ 1,275
2 1,395
3 1,480
4 1,530

If the discount rate is 7 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value $

If the discount rate is 12 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value $

If the discount rate is 23 percent, what is the future value of the cash flows in year 4? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Future value $

To find the FV of a lump sum, we use:

FV = PV(1 + r)^t

FV@7% = $1,275(1.07)^3 + $1,395(1.07)^2 + $1,480(1.07) + $1,530 = $6,272.67
FV@12% = $1,275(1.12)^3 + $1,395(1.12)^2 + $1,480(1.12) + $1,530 = $6,728.77
FV@23% = $1,275(1.23)^3 + $1,395(1.23)^2 + $1,480(1.23) + $1,530 = $7,833.50

Notice we are finding the value at Year 4, the cash flow at Year 4 is simply added to the FV of the other cash flows. In other words, we do not need to compound this cash flow.