Calculate the present value today

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Rory Williams is an independent management consultant with a portfolio of clients. One of his long term clients John Hawk has recently introduced Rory to Melody Malone who runs a secretarial service and has offered Rory a long term contract through which Rory expects to generate the following stream of cash flows. Cash flows will occur at the end of the nominated years.

Cash Flows
Year 0 Year 1 +$ 5,000
Year 2 Year 3 +$ 5,000
Year 4 - $ 2,500 Year 5 +$ 2,700
Year 6 Year 7
Year 8 $ 8,000 Year 9
Year 10 $20,000

Rory expects the market interest rates will be 2.5% p.a. for the next 5 years, then it will increase to 5% p.a. for the following three years (years 6 - 8) and will increase again in years 9 - 10 to 6% p.a.

Assuming Rory's expectations regarding cash flows and interest rates are correct, calculate the present value today and future value in 10 years time of all these cash flows. (Show all calculations and show answers correct to the nearer cent.)

Reference no: EM133062236

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