3) The following two cash flows Cash Flow (A) and Cash Flow (B) are economically equivalent....
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3) The following two cash flows Cash Flow (A) and Cash Flow (B) are economically equivalent. The effective interest rate is 10% per period. Please follow the questions to find out the unknown X. (15 points total) 0 0 M ➡ 2 X/3 X/3 X/3 1 3 2 3 Cash Flow (A) 4 A = $2,000 4 5 Cash Flow (B) X X ut 6 X 6 7 8 00 7 8 00 9 $5,000 9 (a) What is the present equivalent value (at time 0) PA of Cash Flow (A). Please refer to the interest rate tables for numerical answers. (5 Points) (b) Write an expression in terms of the unknown X: What is the present equivalent value P of Cash Flow (B). You are free to decompose Cash Flow (B) further if you want to. Just write down the expression like "e.g. Pg = X (P/F, 4%, 10) + X/2 (P/A, 4 %, 5) - 4,000 " You don't need to calculate the final numerical answer. (10 Points) 3) The following two cash flows Cash Flow (A) and Cash Flow (B) are economically equivalent. The effective interest rate is 10% per period. Please follow the questions to find out the unknown X. (15 points total) 0 0 M ➡ 2 X/3 X/3 X/3 1 3 2 3 Cash Flow (A) 4 A = $2,000 4 5 Cash Flow (B) X X ut 6 X 6 7 8 00 7 8 00 9 $5,000 9 (a) What is the present equivalent value (at time 0) PA of Cash Flow (A). Please refer to the interest rate tables for numerical answers. (5 Points) (b) Write an expression in terms of the unknown X: What is the present equivalent value P of Cash Flow (B). You are free to decompose Cash Flow (B) further if you want to. Just write down the expression like "e.g. Pg = X (P/F, 4%, 10) + X/2 (P/A, 4 %, 5) - 4,000 " You don't need to calculate the final numerical answer. (10 Points)
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