Ans. Nominal interest rate, r = 18% per annum
=> Effective monthly interest rate, m = r/12 = 18/12 = 1.5% per month
=> Effective annual interest rate, i = (1+m)^12 -1 = (1+0.015)^12 - 1 = 0.19562 or 19.562%
Present worth of the cash flow at interest rate i,
PW = 0 + 200000/(1+i) + 0 + 350000/(1+i)^3 + 0 + 400000/(1+i)^5
=> PW = $535774.83
For equivalent uniform worth, we will use the formula for present worth of the annual equivalent cashflows (A) at interest rate 19.562% and present worth $535774.83, we get
PW = 535774.83 = A*[(1-1/(1+0.19562)^5)/0.19562]
=> A = $177428.477
Thank You
please help me draw the labelled cash flow For the cash flows shown below, determine the...
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