Question

Suzette is receiving $10,000 today, $15,000 one year from today, and $25,000 four years from today. She will immediately invest these funds for retirement. If she earns 9.6 percent on her investments, how much will she have in savings 30 years from today

Answer 1

Answer:

$641,547.38

Explanation:

The formula for calculating future value:

FV = P (1 + r)^n

FV = Future value  

P = Present value  

R = interest rate  

N = number of years  

We are to determine the future value of these cash flows. But to determine the future value, we need to determine the present value of the cash flows.

Present value is the sum of discounted cash flows

Present value can be calculated using a financial calculator

To find the PV using a financial calculator:

Cash flow in year 0 =  $10,000  

Cash flow in year 1 =  $15,000

Cash flow in year 2 = 0

Cash flow in year 3 = 0

Cash flow in year 4 = $25,000

I = 9.6

PV = 41,012.11

FV : 41,012.11(1.096)^30 = $641,547.38

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. after inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.  

3. Press compute