Question

For the following cash flows, with 5% per year a. Draw a fully labeled cash flow diagram b. Calculate the equivalent single cash flow at EOY O c. Calculate the equivalent single cash flow at EOY 6 d. Calculate the equivalent annuity cash flows for EOY 1 to 6 Cash Flow, $ 0 300 150 0 150 300 0 0 EOY 0 3 4 5 6 7

Answer 1

a. The cash flow diagram is shown below:

positive cash flow ($) 150 0 0 0 1435 50 Lit) EOY 300 negative cash flows ($)

b. The equivalent single cash flow at the end of year o = $0 (A/F,5%,0) =$0 (Using annuity table for discrete compounding)

c. The equivalent single cash flow at the end of year 6 = $0(A/F,5%,6) = $0* .1470 = $0

d. The equivalent annuity cash flows for EOY 1 to 6= -300((A/F,5%,1) -150(A/F, 5%,2) + 0+ 150(A/F,5%,4) +300(A/F,5%,5) +0

                                                                         = -300*1.000 - 150* .4878 +150* .2320 +300* .1810

                                                                         =-284.07