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3.3.5 Equal-Payment Series Present Worth Amount The objective of this mode of investment is to find the present worth of an equal Interest Formulas and
3.3.5 Equal-Payment Series Present Worth Amount The objective of this mode of investment is to find the present worth of an equal Interest Formulas and Their Applications 33 payment made at the end of every interest period for n interest periods at an interest rate of i compounded at the end of every interest period. The corresponding cash flow diagram is shown in Fig. 3.8. Here, P = present worth A = annual equivalent payment i = interest rate n = No. of interest periods The formula to compute P is (1 + i)" - 1 P = A = A(P/A, i, n) i(1 + i)" where (P/A, i, n) is called equal-payment series present worth factor. P i % lo 1 2 3 4 n A A A A A Fig. 3.8 Cash flow diagram of equal-payment series present worth amount. EXAMPLE 3.5 A company wants to set up a reserve which will help the company to have an annual equivalent amount of Rs. 10,00,000 for the next 20 years towards its employees welfare measures. The reserve is assumed to grow at the rate of 15% annually. Find the single-payment that must be made now as the reserve amount
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