A cash flow series is increasing geometrically at the rate of 8% per year. The i

Question

A cash flow series is increasing geometrically at the rate of 8% per year. The initial payment at EOY 1 is S4.500, with increasing annual payments ending at EOY 20 The interest rate 13% compounded annually for the first sx years and 4% com pounded annually for the remaining 14 years Find the present arm that is equivalent to this cash flow Click the icon to view the interest and annuity table for discrete compounding when the ARR is 4% per year. Click the icon to view the interest and annuity table for discrete compounding when the MARR s 8% per year. Click the icon to view the interest and annuity table for discrete compounding when the MARR is 13% per year. The present amount that is equivalent to this cash flow series is $ (Round to the nearest dollar.)

Explanation / Answer

Year Payments PVF Present value 1 4500 0.884956 3982.301 2 4860 0.783147 3806.093 3 5248.8 0.69305 3637.682 4 5668.704 0.613319 3476.722 5 6122.2 0.54276 3322.885 6 6611.976 0.480319 3175.855 7 7140.934 0.461845 3298.003 8 7712.209 0.444081 3424.849 9 8329.186 0.427001 3556.574 10 8995.521 0.410578 3693.366 11 9715.162 0.394787 3835.418 12 10492.38 0.379603 3982.934 13 11331.77 0.365003 4136.124 14 12238.31 0.350964 4295.206 15 13217.37 0.337465 4460.406 16 14274.76 0.324486 4631.96 17 15416.74 0.312006 4810.112 18 16650.08 0.300006 4995.117 19 17982.09 0.288467 5187.236 20 19420.65 0.277372 5386.745 Present value of cash payments 81096

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