Question

3. Determine the present worth of a maintenance contract that has a cost of $50,000 in year 1 and annual increases of 8% per year for 10 years. Use an interest rate of 8% per year. (10 points) Pg=. 2 - 8v. Sop VVVV. 72 70 Now $s < 4. The equivalent present worth of a geometric gradient series of cash flows for 10 years was found to be $19,776. If the interest rate was 15% per year and the annual rate of increase was 9% per year, what was the cash flow amount in year 1 (calculate A,)? (25 points) 5. GEM Company wants to start saving money for replacement of network servers in 6 years. If the company invests $4000 at the end of year 1 and increases the amount invested by 12% each year, a) How much is the equivalent Present Worth if it earns interest at a rate of 8% per year? (20 points) Gem b) How much will be in the account 6 years from now if it earns interest at a rate of 8% per year ("Hint: Find Pg and then convert to Fg using F/P factor.) (10 points) The enterprise blockchain company

Answer 1

3.

Present worth of Geometric series when interest rate is equal to increase per year = C * n / (1+i)

Present worth = 50000 * 10 / (1+0.08)

= 500000 / 1.08

= 462962.96

4.

Present worth of geometric series = A * [1 - (1+g)^n / (1+i)^n ] / (I-g)

19776 = A* [1 - (1+0.09)^10 / (1+0.15)^10 ] / (0.15-0.09)

19776 = A* [1 - (1.09)^10 / (1.15)^10 ] / (0.06)

19776 = A * 6.913731

A = 2860.39

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