Question

Using the Compound Interest Tables answer these please. Having really hard time figuring these out.

Problem 4: For the diagrams ad below, compute the unknown values W,X,Y,Z respectively, 25 : 50 75 - 100 10% 100 200 300 i = 10% 300 200 100 i = 10%

Answer 1

a. Cash flows at year 1 = 25

It increases by 25 each year (gradient)

Life = 4 years.

Interest = 10%

Calculate W or Present Worth.

PW = A (P/A, 10%, 4) + G (P/G, 10%, 4)

PW = 25 (3.1699) + 25 (4.3781)

PW = 188.7 or 189.

b. Cash Flows at year 1 and 2 = 0

Cash flow at year 3 = 100, increases by 100 every year.

Life = 5 years

Interest = 10%

Calculate X or present worth

PW = [100 (P/A, 10%, 3) + 100 (P/G, 10%, 3)] (P/F, 10%, 2)

PW = [100 (2.4869) + 100 (2.3291)] (0.8264)

PW = 397.99 or 398

c. Cash Flow in year 1 = 300, it decreases by 100 every year.

Life = 3 years

Interest = 10%

Calculate Y or present value.

PW = A (P/A, 10%, 3) – G (P/G, 10%, 3)

PW = 300 (P/A, 10%, 3) – 100 (P/G, 10%, 3)

PW = 300 (2.4869) – 100 (2.3291)

PW = 513.16 or 513