Consider another uneven cash flow stream: (Can you provide xcel formulas/calculations?)
Year Cash Flow
0 $1,000
1 $2,000
2 $0
3 $1,500
4 $4,500
5 $4,000
6 $3,000
7 $5,000
A) What is the value of the entire cash flow stream at the end of Year 7 if all of the cash flows are invested in an account that pays 10% annually?
B) What cash flow today (Year 0), in lieu of the $1,000 cash flow, would be needed to accumulate a future value of exactly $50,000 at the end of Year 7? Hint, replace the Year 0 cash flow with X and solve for X, assuming that the cash flows for Years 1 through 7 remain the same. Also assume annual compounding of cash flows.