A project has the following cash flow. Year zero\'s cash flow is $500. The follo

Question

A project has the following cash flow. Year zero's cash flow is $500. The following years' cash flows increase by $100 each year. At the end of the projects life time, the cash wis S500 The engineer who's evaluating this project disaggregate the cash d by breaking it down to an annuity starting on year O to 10 with A- 5500 and the restas a unifo ,gradient cash low The engineer analyzes the resent th of the ro ct sPA p la FF 1 GIP GbfPLc) What sh uld be the values for a PIAiaXFIPA,1HG(PIG bXF/Pic). What should and

Explanation / Answer

Soln : G here is gradient and as we can see that series is moving by factor 100, so we can say that G = 100

Now, we consider 2nd half , where it is given that G*(P/G,i, b)*(F/P,i,c)

*(P/G,i, b) = Take arthimatic gradient series and move it to single payment to 2 earlier periods than the nonzero payment of series , b = 10, now , in that case the amount calculated at t= -2 as at time t=0, the amount of gradient series = 0 , So, we can say that c =2 as it is moving the value at t= 0 from t = -2

P/A ,i,n = uniform series taking to single payment at point where the first payment is made. So, again if we will take a = 10.

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