Homework SourseFor the cash flow revenues shown below find the value of G t
For the cash flow revenues shown below, find the value of G that makes the equivalent annual worth in years 1 through 7 equal to $500. The interest rate is 6% per year.
The value of G is $ .
| Year | Cash flow, $ | Year | Cash flow, $ |
| 0 | 4 | 225 + 3G | |
| 1 | 225 | 5 | 225 + 4G |
| 2 | 225 + G | 6 | 225 + 5G |
| 3 | 225 + 2G | 7 | 225 + 6G |
Solution
Each period the value of cash flow increases by G. The first cash flow is 225. The annual equivalent is $500 and the rate of interest is 6%. Find G such that
500 = [225(P/A, 6%, 7) + G(P/G, 6%, 7)](A/P, 6%, 7)
500 = 225 + G(P/G, 6%, 7)(A/P, 6%, 7)
275 = G*15.44969*0.17914
This gives G = $99.36
