# Find present equivalent value PW and FW in the cash flow

• Sep 17th 2012, 02:38 PM
jwxie
Find present equivalent value PW and FW in the cash flow
Hi.

http://i.imgur.com/j8EU6.png

This is the problem.

I tried to find the FW first. I see the problem as "I deposite an initial money PW, and on the 4th, 5th, 6th and 7th I deposited $100". How much do I get at the end of the eighth year with i = 0.12. That's how I interpret it. I started by finding PW$\displaystyle \frac{100}{1.12^{4}} + \frac{100}{1.12^{5}} + \frac{100}{1.12^{6}} + \frac{100}{1.12^{7}}$which gives me 63.55 + 45.56 + 50.66 + 45.23 = 205. The outflow on is 40.39. Either using 205 or 205-40.39, and then multiple that by (1 + 0.12) ^ -8 to get the PW, I either get 82.79 or 66.4832. I kinda have the answer. I think the PW is 175.8 and FW is 935.28. How do I get PW? What's wrong with my calculation? Thanks • Sep 17th 2012, 05:11 PM MaxJasper Re: Find present equivalent value PW and FW in the cash flow FW=$935 seems too far out. I get something close to FW=$310.10 & PW=$286.37 but not sure.
• Sep 19th 2012, 02:14 AM
Wilmer
Re: Find present equivalent value PW and FW in the cash flow
Where does PW and FW come from? Should be PV (Present Value) and FV (Future Value).

FV = 100(1.12^4 + 1.12^3 + 1.12^2 + 1.12^1 + 1.12^0) = 635.28

PV = FV / 1.12^8 = 635.28 / 1.12^8 = 256.58

Pretty basic stuff: where were you stuck?
• Sep 19th 2012, 06:24 AM
Wilmer
Re: Find present equivalent value PW and FW in the cash flow
In case this helps; what "it looks like":
Code:

Y  INTEREST BALANCE      DEPOSIT INTEREST BALANCE 0            256.58                          .00 1    30.79  287.37                          .00 2    34.48  321.85                          .00 3    38.63  360.48                          .00 4    43.25  403.73      100.00      .00  100.00 5    48.45  452.18      100.00    12.00  212.00 6    54.27  506.45      100.00    25.44  337.44 7    60.77  567.22      100.00    40.49  477.93 8    66.06  635.28      100.00    57.35  635.28