Problem -95 (algorithmic) Question Help A cash flow series is increasing geometr

Question

Problem -95 (algorithmic) Question Help A cash flow series is increasing geometrically at the rate of 9% per year. The initial payment at EOY 1 is $5,500, with increasing annual payments ending at EOY 20. The interest rate is 13% compounded annually for the first six years and 4% compounded annually for the remaining 14 years. Find the present amount that is equivalent to this cash flow Click the icon to view the interest and annuity table for discrete compounding when the MARR is 4% per year. The present amount that is equivalent to this cash flow series is S 144733.6. (Round to the nearest dollar.)

Explanation / Answer

PV = 109,124.01

A B C D E F G H I J K L M N O P Q R S T 1 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2 Cash Flow with geometrical rate of 9%= Cash flow*(1+9%)^(Years-1) 5500 5995 6534.55 7122.66 7763.7 8462.431752 9224.05061 10054.2 10959.09 11945.41 13020.5 14192.35 15469.66 16861.93 18379.4986 20033.65 21836.682 23801.984 25944.16 28279.137 3 Discount rate for last 13 years 4% 4 Terminal Value $171,523.82 Using excel formula = NPV(A3,G3:T3) 5 Total Value 5500 5995 6534.55 7122.66 7763.7 179986.2525 (= Cash flow at year 8 + Terminal value at year 8) 6 Discount rate of Frst 7 years 13% Present value $109,124.01 Using Excel Formula=NPV(A6,A5:F5)

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