Question

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 * x * 10 1000

5 *x* 11 1000

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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