00:02
Okay, so here in a question we need to calculate the future worth, future worth in years 7.
00:14
So, for this first we need to calculate or find the present value for all these 7 years.
00:19
So, let us take one by one.
00:22
So, when we talk number 1 let us talk how to find the present value okay.
00:29
So, when the formula for present value is cash flow divided by 1 plus r to the power n, where c f is a cash flow and r is a rate of return.
00:42
So, let us calculate for each year for year 0 or we can say this initial year.
00:52
So, here we know the cash flow is 0 equals to 0.
00:56
So, also the present value is equals to 0, when we put 0 here we got the 0.
01:01
So, for year 1, year 1 let us calculate one by one, our cash flow is equals to 500 divided by 1 plus 15 percent.
01:13
So, it is 0 .15 to the power 1 and we calculate it we got the value this just wait just give me a minute yeah.
01:26
So, we got 500 divided by 1 .15, this is for first year initially.
01:35
For year 2, here we know the cash flow for year 2 is also 500 and 1 plus 0 .15 to the power 2.
01:51
So, here we got 500 divided by 1 .3225, when we calculate for year 3, 500 divided by 1 plus 0 .15 to the power 3.
02:15
So, what we got 500 divided by 1 .520875, we can take up to 2 decimals also it is not a problem.
02:30
For year 4, what we calculate this present value, this do not we have to forget these are the present value that is pv.
02:43
So, for year 4, the cash flow is again 500 divided by 1 plus 0 .15 to the power 4, what we got 500 divided by 1 .74900625, these are approximate value...