Trigen Corp. management will invest cash flows of $1,206,765, $1,085,603, $602,301, $818,400, $1,239,644, and $1,617,848 in research and development over the next six years. If the appropriate interest rate is 9.14 percent, what is the future value of these investment cash flows six years from
To calculate the future value of these investment cash flows, we need to use the formula for the future value of a series of cash flows.
The formula for the future value of a series of uneven cash flows is:
FV = CF₁ × (1 + r)^(n-1) + CF₂ × (1 + r)^(n-2) + ... + CFₙ × (1 + r)^(n-n)
Where:
FV = Future Value
CF₁, CF₂, ... CFₙ = Cash flows at each period
r = Interest rate per period
n = Total number of periods
In this case, the cash flows are $1,206,765, $1,085,603, $602,301, $818,400, $1,239,644, and $1,617,848. The interest rate is 9.14 percent, which is equivalent to 0.0914 as a decimal. The investment is made over six years, so n = 6.
Let's calculate the future value of these cash flows:
FV = $1,206,765 × (1 + 0.0914)^(6-1) + $1,085,603 × (1 + 0.0914)^(6-2) + $602,301 × (1 + 0.0914)^(6-3)
+ $818,400 × (1 + 0.0914)^(6-4) + $1,239,644 × (1 + 0.0914)^(6-5) + $1,617,848 × (1 + 0.0914)^(6-6)
Now we can simplify this equation and calculate the future value.