Problem 03.019 Annual Worth Calculations Find the value of x that makes the equivalent annual worth...

Question

Question

Problem 03.019 Annual Worth Calculations

Find the value of x that makes the equivalent annual worth in years 1 through 9 equal to $700 per year. Use an interest rate of 9% per year.

The cash flows in year 0 and year 9 has an unknown value x, and 1 through 8 has an annual worth of $700.

The value of x is determined to be $

Answer 1

Answer #1

Answer: PW of annual flows of $ 700 for 8 years:

PW = 700/1.11 + .... + 700/1.118

PW = $ 3602.29

This must be equal to the PW of cash flows of x in year 0 and 8 and $700 each year from year 1 through 7:

3602.29 = x + 700/1.11 + .... + 700/1.117 + x/1.118

Solve for 'x':

x = $ 211.83

Answer 2

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