30 points) Cash flow diagrams required A makes the two cash flows equivalent at 12% interest...

Question

Question

Answer 1

Answer #1

Present value of Cash flows in A = 100*PVAF(12%, 2 years)+ 120*PVAF(12%, 3-5 years)

= 100*1.6901 + 120*1.9147

= $398.77

Present values of two series are equal

Hence, 398.77 = A*PVAF(12%, 5 years)

398.77 = A*3.6048

A = $110.62

Hence, value of A = $110.62

Answer 2

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