The contract of a new public-private partnership (PPF project has been signed to lease a building at P20,000 per year with an annual increase of P1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate of money is 7%. What lump sum paid today would be equivalent to the 8-year lease
The contract of a new public-private partnership (PPF project has been signed to lease a building at P20,000 per year with an annual increase of P1,500 for 8 years. Payments are to be made at the end of each year, starting one year from now. The prevailing interest rate of money is 7%. What lump sum paid today would be equivalent to the 8-year lease
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
2. Please use the formula provided to answer the solution
![Legend:
Cc - Capitalized Cost (Currency)
Fc - First Cost (Currency)
Mc - maintenance Cost (Currency)
Rc - Replacement Cost (Currency); if no Re: Re Fe
Sy- Salvage Value (Curency); if no Sy: Sy = 0
A - Periodic Amount (Currency)
F-Future Value (Currency)
G - Periodic Amount Increment Amount (Currency)
P - Present Value (Currency)
g - Periodic Amount Increment Rate (Persentage)
i-Nominal Interest Rate (Percent)
m - Number of Periods per Year (Number)
r - Effective Interest Rate (Percent)
t-Number of Years (Number)
Formulae:
Perpetuity (t=00):
Compounding Transformation (i, (m₂)→ 1₂ (m₂)): (1 + ) = (1 +)**
Arithmetic Gradient:
Ordinary Annuity (Payment at End of Period):
P=A1-(1+1)-²)
Geometric Gradient:
Capitalized Cost:
n = mt
r=-
F=A
Annuity Due (Payment at Beginning of Period):
m
F = P(1+r)"
P = F(1+r)-R
F=A
F=
= A ((1+r)^²-1)
P=A (1-(1+r)^)(1+r)
= A (¹ + r)² - 1) (1 + r)
T
FA[(1+r)-1]G[-nr + (1+r)" - 1]
T
r2
A[(1+r)"-(1+g)"]
T-9
Re-Sy
Cc=Fc++ (1+r)"-1
A = Cer](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7053b554-3a97-4d68-beed-d147b9a2b76e%2F1800b57e-a30a-49ee-a58d-b753c9a8922b%2Ftgubzvu_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Legend:
Cc - Capitalized Cost (Currency)
Fc - First Cost (Currency)
Mc - maintenance Cost (Currency)
Rc - Replacement Cost (Currency); if no Re: Re Fe
Sy- Salvage Value (Curency); if no Sy: Sy = 0
A - Periodic Amount (Currency)
F-Future Value (Currency)
G - Periodic Amount Increment Amount (Currency)
P - Present Value (Currency)
g - Periodic Amount Increment Rate (Persentage)
i-Nominal Interest Rate (Percent)
m - Number of Periods per Year (Number)
r - Effective Interest Rate (Percent)
t-Number of Years (Number)
Formulae:
Perpetuity (t=00):
Compounding Transformation (i, (m₂)→ 1₂ (m₂)): (1 + ) = (1 +)**
Arithmetic Gradient:
Ordinary Annuity (Payment at End of Period):
P=A1-(1+1)-²)
Geometric Gradient:
Capitalized Cost:
n = mt
r=-
F=A
Annuity Due (Payment at Beginning of Period):
m
F = P(1+r)"
P = F(1+r)-R
F=A
F=
= A ((1+r)^²-1)
P=A (1-(1+r)^)(1+r)
= A (¹ + r)² - 1) (1 + r)
T
FA[(1+r)-1]G[-nr + (1+r)" - 1]
T
r2
A[(1+r)"-(1+g)"]
T-9
Re-Sy
Cc=Fc++ (1+r)"-1
A = Cer
![The contract of a new public-private partnership (PPP)
project has been signed to lease a building at P20,000
per year with an annual increase of P1,500 for 8
years. Payments are to be made at the end of each
year, starting one year from now. The prevailing
interest rate of money is 7%. What lump sum paid
today would be equivalent to the 8-year lease
payment plan of the PPP project?
Add your answer](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7053b554-3a97-4d68-beed-d147b9a2b76e%2F1800b57e-a30a-49ee-a58d-b753c9a8922b%2Ffc3s87_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The contract of a new public-private partnership (PPP)
project has been signed to lease a building at P20,000
per year with an annual increase of P1,500 for 8
years. Payments are to be made at the end of each
year, starting one year from now. The prevailing
interest rate of money is 7%. What lump sum paid
today would be equivalent to the 8-year lease
payment plan of the PPP project?
Add your answer
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