Please show work EOY Cash Flow 0 $45,000 1 $12,000 2 $11,000 3 $10,000 4 $9,000
ID: 2382471 • Letter: P
Question
Please show work
EOY
Cash Flow
0
$45,000
1
$12,000
2
$11,000
3
$10,000
4
$9,000
5
$8,000
6
$7,000
7
$6,000
8
$5,000
$13,725.46
Please show work for problem #90
In Problem 90, what uniform annual series over [4,7] will be equivalent to the cash flow profile if money is worth 6% compounded annually?
Consider the following cash flow profile:EOY
Cash Flow
0
$45,000
1
$12,000
2
$11,000
3
$10,000
4
$9,000
5
$8,000
6
$7,000
7
$6,000
8
$5,000
With a compounded annual interest rate of 6%, what single sum of money at the end of the sixth year will be equivalent to the cash flow series?$13,725.46
Explanation / Answer
Here we need to calculate the PV of the cash flow series using a discount rate of 6%
Discount rate = 1+6% = 1.06. pv formula used in the table = amount of cash flow/(1.06^time)
Thus the value of all cash flows today is $9675.95
the value of this cash flow at the end of 6 years = NPV*(1.06^6 years)
= 9675.95*(1.06^6) = $13,725.51
Year Cash flow Discount rate PV 0 -45,000 1.06 -45,000.00 1 12,000 11,320.75 2 11,000 9,789.96 3 10,000 8,396.19 4 9,000 7,128.84 5 8,000 5,978.07 6 7,000 4,934.72 7 6,000 3,990.34 8 5,000 3,137.06 NPV 9,675.95