Blue River Technology owns 2 buildings that have a combined total value of $X. Building A is expected to generate a cash flow of $430,000 in 6 years and has a cost of capital of 14.78 percent. Building B is expected to generate a cash flow of $780,000 in 4 years and has a cost of capital of 9.12 percent. What is X?

To determine the total value $ X $, we need to find the present values (PV) of the cash flows from both buildings, then add them together.

The formula for the present value (PV) of a cash flow is:

\[
PV = \frac{FV}{(1 + r)^t}
\]

Where:
- $ PV $ is the present value,
- $ FV $ is the future cash flow,
- $ r $ is the cost of capital (expressed as a decimal),
- $ t $ is the time in years.

### For Building A:
- Future cash flow: $ 430,000 $
- Cost of capital: $ 14.78\% = 0.1478 $
- Time: $ 6 $ years

\[
PV_A = \frac{430,000}{(1 + 0.1478)^6}
\]

### For Building B:
- Future cash flow: $ 780,000 $
- Cost of capital: $ 9.12\% = 0.0912 $
- Time: $ 4 $ years

\[
PV_B = \frac{780,000}{(1 + 0.0912)^4}
\]

Finally, the combined value $ X $ is:

\[
X = PV_A + PV_B
\]

Let me calculate that.The combined total value $ X $ of the two buildings is approximately $ 738,194.05 $.

Would you like more details on any step or have any further questions?

Here are 5 related questions to consider:
1. How does the cost of capital affect present value calculations?
2. What would happen if the cost of capital for Building A increased?
3. How do changes in time horizons affect the present value of future cash flows?
4. What is the relationship between the present value and the future value of an investment?
5. Can you explain how different cash flows impact overall investment value?

**Tip:** Present value calculations are crucial in understanding the value of future cash flows in today's terms, which is essential for making informed investment decisions.

Discover how to calculate the combined total value of two buildings using present value formulas. Building A generates a cash flow of $430,000 in 6 years with a 14.78% cost of capital, while Building B generates $780,000 in 4 years at 9.12%. Learn the step-by-step process and core financial concepts behind this calculation.

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