9 For diagram below compute the unknown value A using the mi

(9) For diagram below, compute the unknown value A, using the minimum number of compound interest factors. 12% i- 360 900

Solution

Since periods are not given, assume they start with 1 and run from 1 to 6. A is the annual equivalent of the cash flow given. Find the annual equivalent of the cash flow so that NPV = 0

A(P/A, 12%, 6) - 360(P/F, 12%, 2) - 900(P/F, 12%, 6) = 0

Convert the same in annualized factors

A = 360(P/F, 12%, 2)(A/P, 12%, 6) + 900(A/F, 12%, 6)

A = 360*0.7972*0.2432 + 900*0.1232

A = 180.67