Compounded value of a series of cash flows, Financial Management

Assignment Help:

Compounded Value of a Series of Cash Flows: - We have considered merely single payment made once as well as its accumulation effect. An investor possibly interested in investing money in instalments and wishes to know the value of its savings after n years.

FV = A (1+i) n ----------- + A (1+i) 2 + A (1+i) 1+ A

Where FV = Future value of the preliminary flow in n years

PV= Initial Cash flow

i= Annual rate of interest

n = No. of years for which compounding is done.

A = Amount deposit or invested.

Illustration: - Mr. X invests Rs.500, Rs.1000, Rs.1500, Rs. 2000 and Rs. 2500 at the end of each year for 5 years. Compute the value at the end of 5 years compounded annually if the rate of interest is 5% p.a.

FV = 500 (1+0.05)4 + 1000 (1+0.05) 3+ 1500 (1+0.05) 2 + 2000 (1+0.05) 1+2500

FV = Rs. 8020


Related Discussions:- Compounded value of a series of cash flows

Stock Valuation, I just purchased a stock that would pay the dividends of t...

I just purchased a stock that would pay the dividends of the first four years as D1 = $0.65, D2 = $0.74, D3 = $0.79, D4 = $0.84. I also told that the dividends would grow continual

Partnership, Par tnership A legally authorized business form in wh...

Par tnership A legally authorized business form in which two or more partners are co-owners, sharing profits, losses, and liabilities related with the business they own.

Relationship b/w bond''s market price and yield to maturity, What is the re...

What is the relationship between a bond's market price and its promised yield to maturity?  Explain. A bond's market price reckon on its yield to maturity (YTM).  When a bond h

Compute the economic order quantity, Q. Compute the economic order quantity...

Q. Compute the economic order quantity? TNG has a current order size of 50000 units Average number of orders per year = demand/order size = 255380/50000 = 5·11 orders Ann

Trading Options, TRADING IN OPTIONS We have already seen that options a...

TRADING IN OPTIONS We have already seen that options are traded on exchanges and have already discussed how to understand published quotations. Let us now learn the trading mec

Types of treasury bills, Types of Treasury Bills Treasury bills are iss...

Types of Treasury Bills Treasury bills are issued at various maturities, generally up to one year. Thus, they are useful in managing short-term liquidity. At present, the GOI (

Embedded options, Embedded Options  is a provision in the ind...

Embedded Options  is a provision in the indenture that gives the issuer and/or the bondholder an option to take action against the other party.

#WACC, Filer Manufacturing has 8.9 million shares of common stock outstandi...

Filer Manufacturing has 8.9 million shares of common stock outstanding. The current share price is $59, and the book value per share is $4. Filer Manufacturing also has two bond is

Show the current liabilities method, Q. Show the Current Liabilities Method...

Q. Show the Current Liabilities Method? Forecasting of Current Assets as well as Current Liabilities Method: - As-per to this method an estimate is made of forthcoming period's

Mr, discuss the applicability of financial management in respect to poultry...

discuss the applicability of financial management in respect to poultry farming in uganda

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd