Could you explain to me what the Future Value amount calculated here (highlighted in purple) represent? I am thinking that it is calculated to obtain the future value of the three $5,000 payouts on separate occasions. If so, does the FV of the $5,000 payouts represent the opportunity cost of not investing in the 11% interest rate investment?

You are offered an investment that will make three $5,000 payments. The first payment will occur four years from today. The second will occur in five years, and the third will fol- low in six years. If you can earn 11 percent, what is the most this investment is worth today? What is the future value of the cash flows? We will answer the questions in reverse order to illustrate a point. The future value of the cash flows in six years is: ($5,000 x 1.112) + (5,000 x 1.11) + 5,000 = $6,160.50 + 5,550 + 5,000 = $16,710.50 The present value must be: Page 155 $16,710.50/1.116 = $8,934.12 Let's check this. Taking them one at a time, the PVs of the cash flows are: $5,000 x 1/1.118 = $5,000/1.8704 = $2,673.20 $5,000