An investment will pay $50 at the end of each of the next 3 years, $250 at the end of Year 4, $350 at the end of Year 5, and $500 at the end of Year 6.
If other investments of equal risk earn 7% annually, what is its present value? Its future value? Do not round intermediate calculations. Round your answers to the nearest cent.

Explanation:

A) Present value

You must discount each cash flow (payment) according to the moment when it is paid, at the same rate of return of other investments fo equal risk: 7%.

Thee formula that you must use is:

Where PV is the present value; CF₁, CF₂, CF₃, CF₄, CF₅, and CF₆ are the cash flows of the years 1, 2, 3, 4, 5, and 6 respectively, and i is the annual return.

Substituting:

Computing:

B) Future value

The formula for future value is:

Where, FV is the future value to calculate; PV is the present value already calculated, r is the rate of return, 7% = 0.07); and t is the number of periods, 6 years.

Substituting and computing:

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