Question
Consider the following two cash flow series of payments: Series A is a geometric series increasing at a rate of 11.5% per year. The initial
Consider the following two cash flow series of payments: Series A is a geometric series increasing at a rate of 11.5% 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.
1. Determine the value of X for which these two series are equivalent if your TVOM is i = 9 %.
2. If your TVOM is 8%, would you be indifferent between these two series of payments? Enter the PW for each series to support this choice. PW, Series A: ? PW, Series B: ?
3. If your TVOM is 5%, would you be indifferent between these two series of payments? Enter the PW for each series to support this choice. PW, Series A: ? PW, Series B: ?
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Finance And Sustainability
Authors: Karolina Daszyńska-Żygadło, Agnieszka Bem, Bożena Ryszawska, Erika Jáki, Taťána Hajdíková
1st Edition
3030344037, 978-3030344030
