Question & Answer: For the cash flows presented in the following diagram, what is the uniform annual equivalent…..

3. For the cash flows presented in the following diagram, what is the uniform annual equivalent worth? The project has an interest rate of 8% per year $15,000 $10,000 $5,000 $5,000 $5,000 $5,000 $5,000 4 10 $7,500 $25,000

For the cash flows presented in the following diagram, what is the uniform annual equivalent worth? The project has an interest rate of 8% per year.

Expert Answer

Answer

Present value of cash flows = 5000/1.08 + 5000/1.08^2 + 5000/1.08^3 + 5000/1.08^4 + 5000/1.08^5 + 15000/1.08^8 + 10000/1.08^10 – (25000 + 7500/1.08^7)

Don't use plagiarized sources. Get Your Custom Essay on

Question & Answer: For the cash flows presented in the following diagram, what is the uniform annual equivalent…..

GET AN ESSAY WRITTEN FOR YOU FROM AS LOW AS $13/PAGE

Order Essay

Present value of cash flows = $3323.34

Let, equivalent annual worth = EAW

Then,

3323.34 = EAW*(1-1/1.08^10)/.08 = EAW*6.71

EAW = 3323.34/6.71

EAW = $495.28

Hence, the uniform equivalent annual worth is $495.28.