Consider the following two cash flow series of payments: Series A is a geometric series increasing at

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Consider the following two cash flow series of payments: Series A is a geometric series increasing at a rate of 8 percent per year. The initial cash payment at the end of year 1 is $1,000. The payments occur annually for 5 years.

Series B is a uniform series with payments of value X occurring annually at the end of years 1 through 5. You must make the payments in either Series A or Series B.

a. Determine the value of X for which these two series are equivalent if your TVOM is i = 6.5 percent.

b. If your TVOM is 8 percent, would you be indifferent between these two series of payments? If not, which do you prefer?

c. If your TVOM is 5 percent, would you be indifferent between these two series of payments? If not, which do you prefer?

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Principles Of Engineering Economic Analysis

ISBN: 9781118163832

6th Edition

Authors: John A. White, Kenneth E. Case, David B. Pratt

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