Question

Engineering Economics

Problem 1(10 points) cirele your final answers The two cash flow shown in the table attached are said to be equivalent in two years of investment at 4% APR compounded quarterly. Find the unknown value of X) that satisfies the equivalence. (all stepe need to be presceatnd cash flew diagrama, effective interest rate, and number of periods...et. ive interes [SI 350 inflow/q (X) inflow /

Answer 1

i = 4% = 4%/4 = 1% per month

t = 2 yrs = 2*4 = 8 quarters

PW of A = 950*(P/A,1%,4) + 1350*(P/A,1%,4)*(P/F,1%,4)

= 950*3.901966 + 1350*3.901966*0.96098

= 8768.98

As both projects are equivalent

X = 8768.98 * (A/P,1%,8) = 8768.98 * 0.13069 = 1146.02