For the cash flows shown below, determine (a) the future worth in year 6 and (b) the equivalent Annual value for years 0 through 12. (Use gradient and annual equivalent series formulas in calculations)

For the cash flows shown below, determine (a) the future worth in year 6 and (b) the equivalent Annual value for years 0 through 12. (Use gradient and annual equivalent series formulas in calculations)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Give an example about a project that we need to use incremental ROR analysis.
For the cash flows shown below, determine (a) the future worth in year 6 and (b) the equivalent Annual value for
years 0 through 12. (Use gradient and annual equivalent series formulas in calculations)
Cash Flow $/yr
Year
0
1-2
3-5
6
7
8
9
10
11-12
-50000
6000
6000
5500
6000
6500
7000
7500
8000
Interest ratio
Monthly effective interest rate (2,1)%
(10)% per year, compounded quarterly
Effective interest rate for 24 months (13)%

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