Question

Determine the interest rate (i) that makes the pairs of cash flows shown economically equivalent. Calculate the Present Worth of the second cash flow series at an 18% annual interest rate using only one formula and then check the answer using another method of calculation. $1380 S1380 $1380 S1380 S1380 $1380 $1380 4 Years 1=? S2500 $1875 S1406 S1055 $791 $593 445 2 4 舀 . Years

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Another method of calculating present worth is as follows: $791 2,500 $1,875 $1,406 $1,05:5 1+0.18)(1+0.18 $593 1+0.18 $445

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