Carla Vista Inc., management is expecting a new project to start paying off, beginning at the...

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Finance

Carla Vista Inc., management is expecting a new project to startpaying off, beginning at the end of next year. Cash flows areexpected to be as follows:
0 1 2 3 4 5
$421,676 $469,452 $482,455 $465,326 $527,444

If Carla Vista can reinvest these cash flows to earn a return of7.9 percent, what is the future value of this cash flow stream atthe end of 5 years? What is its present value? (Roundanswers to 2 decimal places, e.g. 52.75.)

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4.1 Ratings (503 Votes)

a.	Future value of cash flows			$ 27,52,521.51

	Working;

	Year	Cash flow	Future value of 1	Future value of cash flow
	a	b	c=1.079^(5-a)	d=b*c
	1	$ 4,21,676	1.3555	$ 5,71,563.73
	2	$ 4,69,452	1.2562	$ 5,89,733.13
	3	$ 4,82,455	1.1642	$ 5,61,693.89
	4	$ 4,65,326	1.0790	$ 5,02,086.75
	5	$ 5,27,444	1.0000	$ 5,27,444.00

		Total		$ 27,52,521.51

b.	Present value of cash flows			$ 18,82,016.81

	Working;

	Year	Cash flow	Present value of 1	Present value of cash flow
	a	b	c=1.079^-a	d=b*c
	1	$ 4,21,676	0.9268	$ 3,90,802.59
	2	$ 4,69,452	0.8589	$ 4,03,225.79
	3	$ 4,82,455	0.7960	$ 3,84,054.16
	4	$ 4,65,326	0.7378	$ 3,43,298.21
	5	$ 5,27,444	0.6837	$ 3,60,636.05

		Total		$ 18,82,016.81

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Transcribed Image Text

Carla Vista Inc., management is expecting a new project to startpaying off, beginning at the end of next year. Cash flows areexpected to be as follows:012345$421,676$469,452$482,455$465,326$527,444If Carla Vista can reinvest these cash flows to earn a return of7.9 percent, what is the future value of this cash flow stream atthe end of 5 years? What is its present value? (Roundanswers to 2 decimal places, e.g. 52.75.)