In a geometric sequence of annual cash flows starting at the EOY zero, the value of A_{0} is \$ 1,304.35 (which is a cash flow). The value of the last term in the series, A_{10}, is \$ 5,276.82. What is the equivalent value of A for years 1 through 10 ? Let i=20 \% per year. (4.12)
Question 4.T-Y-S.T: In a geometric sequence of annual cash flows starting at the...
\$ 1,304.35(1+\bar{f})^{10}=\$ 5,276.82 ; Solving yields \bar{f}=15 \%
\begin{gathered}P_{-1} =\frac{\$ 1,304.35[1-(P / F, 20 \%, 11)(F / P, 15 \%, 11)]}{0.20-0.15} \\ =\frac{\$ 1,304.35[1-(0.1346)(4.6524)]}{0.05} \\=\$ 9,750.98 \\ \therefore P_{0} =\$ 9,750.98(F / P, 20 \%, 1)=\$ 9,750.98(1.20)=\$ 11,701.18 \\ \therefore A =\$ 11,701.18(A / P, 20 \%, 10)=\$ 11,701.18(0.2385)=\$ 2,790.73 \end{gathered}Related Answered Questions
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