Question

which of the following is true for calculating the future value of multiple cash flows?

you can only find the fv of multiple cash flows if they all have the same interest rate.

it is more complex to find the fv of annuities than the fv of irregular cash flows.

if the cash flows arent uniform, you must find the fv of each cash flow and then add them together.

to find the fv of multiple annuities, multiply the sum of all the present values by the interest rate plus time period.

Explanation:

• Analyze each option:
• First option: Future value (FV) of multiple cash flows can be calculated even with different interest rates (by calculating each cash flow's FV with its rate), so this is false.
• Second option: Annuities have uniform cash flows, so their FV is simpler to calculate (using annuity formulas) than irregular cash flows (which require calculating each FV separately), so this is false.
• Third option: For non - uniform (irregular) cash flows, the correct method is to find the FV of each individual cash flow and then sum them. This is a fundamental concept in time - value of money for multiple cash flows.
• Fourth option: The formula for FV of annuities is not multiplying the sum of present values by (interest rate + time period). The correct formula for FV of an ordinary annuity is $FV = P\times\frac{(1 + r)^{n}-1}{r}$, so this is false.

Answer:

The correct option is: If the cash flows aren't uniform, you must find the FV of each cash flow and then add them together.