Find the future value at the end of year 3 of the following stream of cash flows received at the end of each year,assuming the firm can earn 8 percent on its investments.
A)$51,780
B)$39,248
C)$47,944
D)$40,981

Question

Find the future value at the end of year 3 of the following stream of cash flows received at the end of each year,assuming the firm can earn 8 percent on its investments. 
A)$51,780 
B)$39,248 
C)$47,944 
D)$40,981

Quizplus · Accepted Answer

To solve the problem, we need to calculate the future value of an annuity. We can use the formula:

FV = C x [(1 + r)^n - 1]/r

where: 
C = cash flow received at the end of each year 
r = interest rate per year 
n = number of years

Plugging in the numbers, we get:

FV = $12,000 x [(1 + 0.08)^3 - 1]/0.08 = $47,944

Therefore, the best choice is C.

Find the Future Value at the End of Year 3