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The table below summarizes the net cash flow associated with the development and sale of a new product. The interest rate is 20% per year,

The table below summarizes the net cash flow associated with the development and sale of a new product. The interest rate is 20% per year, compounded quarterly.

Year

1

2

3

4

Cash Flow, $

-100,000

200,000

-25,000

100,000

  1. Draw the cash flow diagram.
  2. Identify the following 5 parameters: r, t, CP, PP, m
  3. Formulate the solution for the equivalent future worth at the end of the fourth year.

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