Consider the following cash flow profile:

Suppose the positive-valued cash flows are now replaced by a geometric series. If the cash flow at end-of-year 1 is $10,000, what geometric rate is required for the cash flow profiles to be equivalent? Interest is at a compounded annual rate of 6 percent.

Transcribed Image Text:

EOY Cash Flow EOY Cash Flow EOY Cash Flow 0 -$45,000 3 +$10,000 6 +$7,000 1 +$12,000 4 +$9,000 7 +$6,000 2 +$11,000 5 +$8,000 8 +$5,000