Question
In: Economics
An arithmetic cash flow gradient series equals $650 in year 1, $750 in year 2, and...
An arithmetic cash flow gradient series equals $650 in year 1, $750 in year 2, and amounts increasing by $100 per year through year 12. At i = 15% per year, determine the present worth of the cash flow series in year 0.
The present worth of the cash flow series in year 0 is $
please help me with this question
Solutions
Expert Solution
Starting year 3, Cash flow in year N = [Cash flow in year (N - 1)] + $100
Present worth is computed as follows.
| Year | Cash Flow ($) | PV Factor @15% | Discounted Cash Flow ($) |
| 1 | 650 | 0.8696 | 565.22 |
| 2 | 750 | 0.7561 | 567.11 |
| 3 | 850 | 0.6575 | 558.89 |
| 4 | 950 | 0.5718 | 543.17 |
| 5 | 1050 | 0.4972 | 522.04 |
| 6 | 1150 | 0.4323 | 497.18 |
| 7 | 1250 | 0.3759 | 469.92 |
| 8 | 1350 | 0.3269 | 441.32 |
| 9 | 1450 | 0.2843 | 412.18 |
| 10 | 1550 | 0.2472 | 383.14 |
| 11 | 1650 | 0.2149 | 354.66 |
| 12 | 1750 | 0.1869 | 327.09 |
| Present Worth ($) = | 5641.89 |
Excel screenshot:
Rahul Sunny answered 1 year agoRelated Solutions
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