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Math Help - Find present equivalent value PW and FW in the cash flow

  1. #1
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    Find present equivalent value PW and FW in the cash flow

    Hi.



    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
    \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
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  2. #2
    Senior Member MaxJasper's Avatar
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    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.
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  3. #3
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    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?
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  4. #4
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    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
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