Calculate the value of x for the cash flows below such that the equivalent total value in year 8 is $20,000, using an interest rate of 15% per year.Year          Cash flow, $                      Year             Cash flow, $0             2000                                      6                    x1             2000                                      7                    x2                x                                         8                    x3                x                                         9                10004                x                                        10               10005                x                                        11               1000

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Asked Oct 24, 2019
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Calculate the value of x for the cash flows below such that the equivalent total value in year 8 is $20,000, using an interest rate of 15% per year.

Year          Cash flow, $                      Year             Cash flow, $

0             2000                                      6                    x

1             2000                                      7                    x

2                x                                         8                    x

3                x                                         9                1000

4                                                      10               1000

5                x                                        11               1000

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Expert Answer

Step 1

Equivalent value of a cash flow, Ct occurring at time t, at the end of year n = Ct x (1 + r)n - t where r = interest rate 

In this problem, n = 8 and r = 15%

Hence, the equivalent future...

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