Question
In: Accounting
The future worth in year 10 of an arithmetic gradient cash flow series for years 1...
The future worth in year 10 of an arithmetic gradient cash flow series for years 1 through 10 is $750,000. If the gradient increase each year, G, is $2250, determine the cash flow in year 1 at an interest rate of 6% per year.
Solutions
Expert Solution
Cash Flow in Year 1= 47,851
| PV of incremental Cash Flow | + | PV of Cash Flows | = | Present Value of Future Worth |
| 66,605 | + | Cashflow*7.3600871 | = | 750000*0.5583948 |
| 66,605 | + | Cashflow*7.3600871 | = | 418,796 |
| Cashflow | = | (418796-66605)/7.3600871 | ||
| Cashflow | = | 47,851 |
| Year | Incremental Cash Flow | Present Value Factor | Present Value |
| 1 | - | 0.9433962 | - |
| 2 | 2,250.00 | 0.8899964 | 2,002 |
| 3 | 4,500.00 | 0.8396193 | 3,778 |
| 4 | 6,750.00 | 0.7920937 | 5,347 |
| 5 | 9,000.00 | 0.7472582 | 6,725 |
| 6 | 11,250.00 | 0.7049605 | 7,931 |
| 7 | 13,500.00 | 0.6650571 | 8,978 |
| 8 | 15,750.00 | 0.6274124 | 9,882 |
| 9 | 18,000.00 | 0.5918985 | 10,654 |
| 10 | 20,250.00 | 0.5583948 | 11,307 |
| 7.3600871 | 66,605 |
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ekkarill92 answered 2 years agoRelated Solutions
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