Question Five: (25 marks)

1. 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.

1. First, calculate the present value using a time line, where each column corresponds to a period of calendar time. (5 marks)

2. Second, use a formula for the present value. (4 marks)

3. Third, use Excels PV function for the present value. (4 marks)

2. 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?

1. 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)

2. Second, use a formula for the future value. (4 marks)

Third, use Excels FV function for the future value. (4 marks)